Annual Accounts - 2022-23
Argyll and Bute Council · 20 June 2023
Back to Audit and Scrutiny Committee — 20 June 2023 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
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Argyll and Bute Council Comhairle Earra Ghàidheal agus Bhòid Audited Annual Accounts For the year ended 31 March 2023
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FRONT COVER PICTURE: MULL
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LANGUAGE OPTIONS If you would like this document in another language or format, or if you require the services of an interpreter, please contact us. Financial Services Argyll and Bute Council Kilmory Lochgilphead Argyll PA31 8RT Tel: 01546 605522
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ANNUAL ACCOUNTS CONTENTS Page Management Commentary 4-21 Statement of Responsibilities for the Annual Accounts 22 Annual Governance Statement 23-32 The Remuneration Report 33-49 Expenditure and Funding Analysis 50-51 Statement of Comprehensive Income and Expenditure 52-53 Balance Sheet 54-55 Statement of Movement in Reserves – Movement in 2022-23 56-57 Statement of Movement in Reserves – Comparative Movement in 2021-22 58-59 Cash Flow Statement 60 Notes to the Financial Statements (See Page 2-3) 61-125 Council Tax Income Account 126 Notes to the Council Tax Income Account 127 Non Domestic Rate Income Account 128 Notes to the Non Domestic Rate Income Account 129 Group Accounts - Introduction 130 Group Statement of Comprehensive Income and Expenditure 131 Group Balance Sheet 132-133 Group Statement of Movement in Reserves – Movement in 2022-23 134 Group Statement of Movement in Reserves – Comparative Movement 2021-22 Group Cash Flow Statement 135 136 Notes to the Group Financial Statements 137-141 Independent Auditors Report 142 -145 Glossary of Terms Appendix A: Trade Union Facility Time Statement 2022-23 146-147 148-149
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NOTES TO THE FINANCIAL STATEMENTS CONTENTS P Note No Page 1 Summary of Significant Accounting Policies 61-74 2 Accounting Standards Issued But Not Yet Adopted 74 3 Critical Judgements in Applying Accounting Policies 74-75 4 Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty 75-77 5 Expenditure and Funding Analysis 78/79 6 General Fund Reserves 80 7 Supplementary Notes to the Statement of Comprehensive Income and Expenditure 81-82 8 Other Operating Income and Expenditure 83 9 Agency Services 83-84 10 Community Care and Health (Scotland) Act 2002 84 11 Fees Payable to Audit Scotland 86 12 Waste Management Public Private Partnership 886 13 Grant Income 86 14 Related Parties 86-87 15 Property, Plant and Equipment 88-93 16 Heritage Assets 93 17 Intangible Assets 94-95 18 Investment Property 95-96 19 Schools Built under Public Private Partnership Contracts (PPP) 96-100 20 Operating Leases 100-101 21 Finance Leases 102-102 22 Long Term Debtors 103 23 Debtors 103 24 Assets Held for Sale 103 25 Cash and Cash Equivalents 104 26 Creditors 105 27 Financial Instruments Disclosures 105-109 28 Other Liabilities 109
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NOTES TO THE FINANCIAL STATEMENTS CONTENTS www.argyll-bute.gov.uk __________________________________________ Page 1 P Note No Page 29 Provisions 110-111 30 Capital Grants Received in Advance 111 31 Defined Benefit Pension Schemes 111-117 32 Unusable Reserves 121-122 33 Usable Reserves 122 34 Contingent Liabilities 123 35 Termination Benefits 123-124 36 Trust Funds and Other Third Party Funds 124 37 Common Good Funds 124-125 38 Tax Incremental Financing (TIF) Projects 125 39 Cash Flow Statement – Operating Activities 126 40 Cash Flow Statement – Investing Activities 126 41 Cash Flow Statement – Financing Activities 127
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 2 1. INTRODUCTION Welcome to the financial statements for Argyll and Bute Council and its group for the year ended 31 March 2023. The statements have been compiled in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom (the Code). This commentary outlines the key messages regarding the performance of the Council over the 2022-23 financial year as well as providing an indication of risks and issues which may impact upon the Council in the future. 2. PROFILE OF ARGYLL AND BUTE COUNCIL The report starts with outlining some key facts about Argyll and Bute.
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 3 3. VISION AND PRIORITIES The Council had a 5 year Corporate Plan for the period 2018-2022 with the mission “To make Argyll and Bute a place people choose to Live, Learn, Work and Do Business”. After the Local Government Elections in 2022, the Council agreed a renewed vision and a revised set of priorities at their meeting on 24 November 2022. The Council’s renewed vision is: We have a vision for a successful, vibrant Argyll and Bute with a growing population and a thriving economy. A place where people want to come to live, to work and to do business as a result of action to combat and reverse decline. We see the potential for thriving local economies that support our rich mix of remote, rural and island communities. Communities which also benefit from services that work - where we make the best use of all of our resources so that our core business as a council is as effective as possible.
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 4 We want Argyll and Bute’s communities to be on a level playing field with others around the country - that is why we will campaign for equity for our communities on issues like fair funding, coping with challenges like the cost of living, and securing digital access and physical access to other opportunities. We will do our utmost to ensure that local voices and needs are taken into account in national decision-making. We recognise that the cost of living crisis will affect countless households in Argyll and Bute. We want to play a part in responding to that and mitigating the impact on our communities’ overall wellbeing and future success. We see our council and our communities working together in playing our part and making our contributions to wider priorities like climate change, economic growth, strong local governance and more - using our strong track record in partnership working, at all levels, to secure the best possible outcomes. Our Priorities for the Council Term 2022 to 2027 are shaped around delivering this vision for Argyll and Bute, our people, our success and our future. A new Corporate Plan for the period 2023-2027, due to be presented to Council on 29 June 2023, captures these new priorities. Details on activity, for each financial year, against the Council priorities will be set out in a new Council Annual Business Plan, also due to be presented to Council on 29 June 2023. This new document replaces the former annual Service Plans to bring more focus and scrutiny on the delivery and performance of the organisation against its priorities. This delivers on the recommendation in our Best Value Audit to make the link between priorities and performance clearer. The Argyll and Bute Community Planning Partnership (CPP) brings together local public services with communities they service, and provides a focus for partnership working that targets specific local circumstances. Partners work together to improve local services and to ensure that they meet the needs of local people, especially those who need the services most. The Argyll and Bute Outcome Improvement Plan has been in place for the last 10 years and had six key outcomes. Our economy is diverse and thriving We have an infrastructure that supports sustainable growth Education skills and training maximise opportunities for al Children and young people have the best possible start People live active, healthier and independent lives People will live in safe and stronger communities, The Argyll and Bute CPP has completed its community engagement on identifying the priorities for the next 10 years (2023 – 2033) and these are: 1. Housing 2. Transport, 3. Community wealth building. A plan on how the CPP will seek to address these priorities will emerge in due course. Argyll and Bute Council will continue to be a leading partner in the partnership and ensure that the priorities of the CPP and the Council are aligned. Some of our achievements, and the challenges we faced, in relation to the Council’s agreed Corporate Outcomes are highlighted below.
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 5 Ulva Housing Initiative An investment of £163k from the Council’s Strategic Housing Fund has been made for six affordable houses on Ulva to drive population growth on Argyll and Bute’s island communities. The aim is to ensure a sustainable economy on the island by increasing the number of residents. This investment is the latest step to increase housing availability in the area with the Strategic Housing Improvement Plan (SHIP) including plans for delivering 951 new affordable houses by 2027. People Live Active Healthier and Independent Lives Hermitage Park Hermitage Park in Helensburgh was presented with a Green Flag Award which acknowledges quality green open spaces across the country that help to boost health and wellbeing. The award celebrates well maintained parks and greenspaces and supports the opportunities that they provide to enable exercise, improve mental wellbeing and provide safe areas for play – something that has been particularly important to everyone over the last couple of years. People will live in safer and stronger communities Community Safety Partnership Strategy Developed the Community Safety Partnership Strategy 2021-2023 which underpins the Argyll and Bute Outcome Improvement Plan and sets out strategic priorities in relation to: We live in a safe and positive community We encourage safer road and water use Our natural and built environment is protected Our communities are supported and included. It also identifies how key partners including the Council, Police Scotland, Scottish Fire and Rescue Service, HM Coastguard, Health & Social Care Partnership (HSCP), Third Sector Interface (TSI) and local groups will bring together resources to ensure that Argyll and Bute is a safer place to live, work and visit. Scottish Psychological Trauma Training Plan The aspiration to ensure we have a trauma responsive workforce has continued to progress across Education Services in collaboration with the Health and Social Care Partnership, in line with the Scottish Psychological Trauma Training Plan. The appointment of a training officer is bringing a coordinated approach to ensuring that staff within teams have the right level of training and support to fulfil their responsibilities to children, families and colleagues. This training is leading to increased understanding of the impact of trauma and is supporting services to ensure their day to day actions and wider service delivery holds trauma in mind to build safer and stronger communities.
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 6 Education skills and training maximise opportunities for all The level of Participation in education, training or employment for 16-19 year-olds in Argyll and Bute was 93.9% for 2022. This represents an increase from 93.5% for the same period in 2021 (equivalent to around 13 young people). Argyll and Bute is ranked 5th of all local authorities in Scotland for participation. Collaborative working between secondary schools, The Developing the Young Workforce Argyll and Bute Regional Group, Argyll College, Skills Development Scotland, Community Learning and the Argyll and Bute Employability Partnership is successfully addressing the challenges of supporting young people into sustained positive destinations. Secondary schools have worked to develop a wide range of learning pathways for young people, enabling them to achieve a broad range of skills through national and wider achievement qualifications. A high number of young people enhanced their achievement portfolio in 2022-2023. There was a corresponding rise in the number of young people transitioning from school to a positive destination such as employment, training or further and higher education, increasing from 95.01% in 2022 to 96.42% in 2023. This figure represents a three year increasing trend, and puts Argyll and Bute above The Northern Alliance Regional Improvement Collective, the rest of Scotland and the Insight Virtual Comparator figures for Leaver Initial Destinations. Flexible Learning Plans (FLPs) are bespoke curriculum plans for individual pupils in the Senior Phase who have disengaged from full-time education and are at risk of under-achievement or not transitioning to a positive destination post-school. In order to re-engage and re-enthuse such young people with their education, such individualised learning programmes are being put in place for each identified pupil, often splitting their week between working towards specific qualifications and accreditation in school, and vocational learning in the form of a regular, structured work placement. In 2022-23, there were 32 Flexible Learning Plans in place across secondary schools in Argyll and Bute, and evaluation demonstrates their effectiveness in re-engaging young people, and supporting them into positive destinations The first Argyll and Bute Developing the Young Workforce and Employability Conference was held in Dunoon in May 2023. The conference brought young people, schools, employers, The Argyll and Bute Employability Partnership, Skills Development Scotland and other agencies and third sector partners together to focus on increasing opportunities for both young people and employers, and to celebrate successes and progress. The feedback from delegates was extremely positive, in terms of the quality of key speakers, the usefulness of the workshops and the contribution of young people from across Argyll and Bute.
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 7 Children and young people have the best possible start Our ongoing commitment to closing the poverty related attainment gap and raised attainment for all is demonstrated through our relentless focus on supporting and challenging all schools to continuously improve and ensure a sharp focus on improved outcomes for all children and young people across Argyll and Bute. Some progress towards closing this gap can be evidenced through: A decrease in the poverty related attainment gap between Scottish Index of Multiple Deprivation Quintile 1 pupils (48%) and Quintile 5 pupils (81%) from 33 percentage point difference between most and least deprived in 2020/21 to 27 percentage point difference between most and least deprived in 2021/22 for Literacy measures. This demonstrates a 6 percentage point difference improvement in closing the poverty-related attainment gap in Literacy at P1/4/7 combined from 2021 to 2022. A decrease in the poverty-related attainment gap between SIMD Quintile 1 pupils (58%) and Quintile 5 pupils (87%) from 29 percentage point difference between most and least deprived in 2020/21 to 18 percentage point difference between most and least deprived in 2021/22 for Numeracy. This demonstrates an 11 percentage point difference improvement in closing the poverty-related attainment gap in Numeracy at P1/4/7 combined from 2021 to 2022. Evidence of raised attainment for cohorts of children who have been part of the Children and Young People’s Improvement Collaborative (CYPIC) Improving Writing Programme. Schools were selected based on lower attainment in writing at P4 and numbers of children residing in Quintile 1. Feedback from practitioners has been overwhelmingly positive with all reporting increased motivation and engagement as well as increased attainment. Challenges faced have included the need for greater consistency across School Improvement and Pupil Equity Funding plans. Ongoing support and challenge has been provided to schools to ensure that clear measures are identified from the outset in order to gauge impact of interventions and initiatives and that senior leaders are utilising data effectively in order to identify and target those learners most in need of support. Our economy is diverse and thriving Helensburgh Waterfront Development The Helensburgh Waterfront Development is a £23m project delivering new improved facilities for the Community. The second phase of the works are now complete and to date this includes a state of the art leisure centre and swimming pool, seating areas and events spaces, footpaths and parking. The Leisure centre, operated by Live Argyll, has seen a big uptake in memberships and the open area provides space for outdoor events and seating. Further information in relation to the project including regular updates can be found on the Councils website ( Helensburgh Waterfront Development - updates (argyll-bute.gov.uk) ).
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 8 Film and TV Productions Productions filmed in Argyll and Bute not only add value to our economy but also advertises the area to visitors. Accommodation providers, local shops, caterers and services all benefit from an increase in filming across Argyll and Bute. From 2021 to 2023 there were 89 productions filmed in Argyll and Bute, with an estimated local production spend of £1.1m. The sector continues to recover from the impact of the pandemic with a substantial rise in filming requests now being received. We have an infrastructure that supports sustainable growth Strategic Timber Transport Scheme (STTS) Roads and Infrastructure Services were successful in gaining and delivering a £1.025m bid which was one of the largest bids for any Local Authority in Scotland. The STTS funding is earmarked for projects which minimise the impact of timber lorries on our rural road network. It means that for every £1 Argyll and Bute Council spend the STTS funding support, on average, more than doubles this investment. Over the last decade the Council has been successful in levering approximately £10m of investment through the STTS. Our Road Network supports thousands of journeys every day and are a vital component of a thriving economy for our remote communities. Road transport infrastructure benefits everyone by providing access socially, commercially, educationally and enabling service access for energy supply, communications and the digital network. Campbeltown Flood Prevention Scheme The Campbeltown Flood Prevention Scheme is a £15m project which was initiated in 2017 with site work beginning in August 2022 and works expected to be completed in February 2024. The scheme is funded 80% by the Scottish Government and 20% by Argyll and Bute Council. After monitoring the impact of flooding in the town over the last five years the project addresses the various causes of flooding. Work includes the creation of a storage reservoir, a new culvert, installation of a water storage tank and new pipelines. It also offers free upgrades to houses which are primarily affected by flooding where residents can benefit from things such as flood gates, replacement anti-flood air bricks or covers, and waterproofing works. Further information in relation to the project including regular updates can be found on the Councils website (Campbeltown Flood Protection Scheme (argyll-bute.gov.uk)).
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 9 4. FINANCIAL PERFORMANCE 2022-23 The Council has a robust financial reporting framework in place and a comprehensive monitoring pack is prepared and presented to every Policy and Resources Committee. This includes reports on the revenue budget, capital plan, financial risks, treasury monitoring, reserves and balances and delivery of any previously agreed savings. The financial framework is shown on the left. Revenue: Outturn against Budget The performance against budget for financial year 2022-23, after adjusting for automatic and proposed earmarked reserve proposals, was an overall underspend of £3.345m, 1.08% as summarised in the table below. (The corresponding position for 2021-22 was an underspend of £1.630m, 0.59%.) 2022-23 Final Revenue Budget Outturn Actuals Budget Variance Percentage Adjusted for Automatic Earmarkings (Overspend) Underspend £000 £000 £000 % Chief Executive's Unit 7,547 7,754 207 2.67% Executive Director (Douglas Hendry) 127,336 129,538 2,202 1.70% Executive Director (Kirsty Flanagan) 50,426 48,363 (2,063) (4.27%) Total Departmental Expenditure 185,309 185,655 346 0.19% Joint Boards 1,326 1,496 170 11.38% Loans Fund 19,451 26,477 7,026 26.54% Pension Costs 1,417 1,554 137 8.82% Other 7,261 6,884 (377) (5.48%) Total Central Expenditure 29,455 36,411 6,956 19.10% Social Work 74,391 74,391 0 0.0% Total Social Work Expenditure 74,391 74,391 0 0.0% Total Expenditure 289,155 296,457 7,302 2.46% Total Funding 310,914 310,260 654 0.21% UNDERSPEND 7,954 2.58% Proposed Unspent Budget Earmarking Proposals 4,610 UNDERSPEND AFTER PROPOSED EARMARKINGS 3,345 1.13%
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 10 Within the Chief Executive’s Unit (Community Planning and Finance) there was a small underspend which was largely due to an over-recovery of NDR commission due to a successful debt recovery campaign during the year. Within the remit of Executive Director Douglas Hendry (Education, Legal and Regulatory Services and Commercial Services), there was an overall underspend due to: Reduced staffing costs in Education as a combined result of industrial action by teachers, when striking staff weren’t paid for the days they were on strike, and a reduction in the number of teaching and non-teaching posts in schools. Reduced spending in Catering and Cleaning Services due to lower demand for school meals, which reduced the amount spent on food purchases, and in staffing costs due to vacancies and challenges recruiting new staff. Reduced spending in Legal and Regulatory Support due to election costs being lower than had been expected and in staffing costs due to vacancies and challenges recruiting new staff. Within the remit of Executive Director Kirsty Flanagan (Roads and Infrastructure, Development and Economic Growth and Customer Support Services) there was an overall overspend due to: Higher than expected overall costs within Piers and Harbours Operations due to a combination of increased spending on staffing and lower than anticipated income from fees and charges. Increased costs in Roads Maintenance, including higher than expected costs to keep key transport routes operating safely during the winter period. Increased maintenance costs in street lighting operations. Lower than expected income from car parking and parking permit charges. The impact of higher spending in the above services was partially reduced by lower spending on staff costs in other parts of the department due to staffing vacancies. The main reason giving rise to the underspend in central costs was due to a one-off treasury gain from the repayment of loans to achieve a significant discount during a small window of opportunity. In addition, we received higher than anticipated income on our investments due to the higher interest rates and had a small saving in respect of payments for Joint Boards and Unfunded pensions. These underspends were partially offset by overspends in utilities and insurance costs. Social Work, managed by the Health and Social Care Partnership, reported an underspend of £4.634m as a result of unspent Scottish Government Grants and underspends across Health and Community Care, Children and Families and centrally held funds (as per CIPFA/LASAAC Guidance, the earmarking on the HSCP has been recognised as a creditor on the Council’s balance sheet making the funds available to Social Work to spend in future years). There was a favourable position in relation to Council Tax funding due to an increase in the Council tax base and a better performance in Council Tax collection which is likely to be partially linked to the cost of living grant awards where Scottish Government funding was credited to Council Tax accounts. The overall favourable position for Departmental and Central Expenditure Budgets has provided the opportunity to earmark unspent budget for specific purposes aligned to the objectives, priorities and targets of the Council.
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 11 Delivery of 2022-23 Agreed Savings The Council has been required to make significant budget savings for a number of years in order to ensure it responds to continued funding reductions, rising cost pressures and complies with its statutory requirement to set a balanced budget whilst meeting the needs of local residents. Budget savings of £2.722m (21 saving options) were agreed for 2022-23. These, and savings agreed in previous years which had to be delivered in 2022-23 totalling £0.081m (12 saving options), were monitored throughout the year. The chart on the right shows the overall delivery of savings and any shortfall was absorbed within departmental resources as is evidenced from the overall departmental underspends. These saving options are all recurring in nature. Capital: Outturn against Budget The net 2022-23 capital expenditure was £30.215m compared to an annual budget of £33.374m, (adjusted during the year for previously agreed slippages, accelerations and virements) giving rise to a year end slippage/underspend of £3.159m (9.47%). There are a number of under and (overspends) within the outturn position, the most significant are noted below Project (Over) / Under Spend (£m) Primary Schools 0.823 Helensburgh Waterfront Development 0.692 Street Lighting LED Replacement 0.674 CHORD – Oban 0.626 Environmental Projects 0.511 Free School Meals 0.405 Fleet Management 0.367 Nature Restoration Fund 0.346 Helensburgh Office Rationalisation 0.300 Roads Reconstruction (0.968) Kilmory Business Park Income (0.979) After accounting for previously agreed slippages, the total slippage in the capital programme in 2022-23 was £50.323m. As reported in Audit Scotland’s Financial Overview 2021-22, capital expenditure across Scotland’s councils continued to slip due to COVID-19, inflationary costs and shortages in construction materials, impacting both cost and delivery plans. This is something that has continued into 2022-23. There are also elements of slippage that can be attributed to incorrect profiling of spend at the start of
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 12 the financial year as opposed to delays in the programme. This is particularly the case within the Harbour Investment Programme which accounts for almost £33m of the overall slippage. There are 164 projects within the Capital Plan: 74 of the projects are complete or on track and 90 are off track but recoverable as a result of the slippage mentioned previously within the capital programme. There are no projects off track that are not recoverable. Health and Social Care Partnership (HSCP) The Argyll and Bute Integration Joint Board (IJB) with responsibility for Social Work and a range of health services was established and came into effect on 1 April 2016. The Council approved the 2022-23 budget on 24 February 2022 and the amount approved for Social Work services transferring to the Integration Joint Board for 2022-23 was £68.105m. The budget figures quoted in the previous outturn table include in-year adjustments. In terms of the outturn position, the HSCP has reported a breakeven position for 2022-23 and there is no debt outstanding to the Council. The Council has a creditor totalling £5.006m on its balance sheet in relation to earmarked reserves which the Council holds on behalf of the HSCP. The earmarked balance comprises £1.450m of Scottish Government funding for a range of specific Scottish Government Initiatives, £1.330m of general reserves and £2.226m for service transformation and infrastructure investment. 5. FINANCIAL STATEMENTS Expenditure and Funding Analysis Statement The Expenditure and Funding Analysis Statement shows how the Council funding is spent across services. It also compares to the expenditure shown in the Statement of Comprehensive Income and Expenditure and details the differences between the two. The differences are a result of accounting statutory adjustments that are required within the Statement of Comprehensive Income and Expenditure, for example, depreciation, pension adjustments etc. Comprehensive Income and Expenditure Statement (CIES) The CIES shows the accounting cost of providing services rather than the amount to be funded from taxation. Councils raise taxation to cover expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement. The Council is required to make various statutory accounting adjustments to the net cost of services as reported in the budgetary outturn in order to comply with the Code of Practice for Local Authority Accounting in the United Kingdom 2022-23. These accounting adjustments include depreciation, loans fund principal repayment and accrued holiday leave not taken by 31 March 2023. Internal income also requires to be removed between segments within the CIES. During 2022-23 the Council continued to manage a range of support funding made available by the Scottish Government. The disclosure of these transactions in the Council’s financial statements depends on whether the Council is acting as an agent (i.e. acting as an intermediary) or a principal (acting on its own behalf). LASAAC Guidance on Accounting for Coronavirus Grants has confirmed that where the Council is acting as an agent it should not recognise the transactions as income or expenditure in the Comprehensive Income and Expenditure Statement although it is necessary to recognise a creditor (where funding from the Scottish Government has been provided in advance) or debtor (where funding is provided in arrears) in the Balance Sheet. This guidance has been applied to the Council’s 2022-23 financial statements. Reconciliation of CIES to Revenue Budget Outturn A reconciliation of the Surplus on the Provision of Services of £5.994m as noted in the CIES to the revenue budget outturn of £3.345m underspend is shown below.
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 13 Reconciliation of CIES to Revenue Budget Outturn £000 £000 Surplus/(Deficit) on Provision of Services (5,994) Remove statutory adjustments that don't feature in budget outturn: Depreciation 24,570 Impairment of Assets charged to services 3,147 Capital Funding (22,549) CFCR (2,938) Pension Adjustment 19,970 Statutory Repayment of Debt (20,317) Repayment of Finance Leases (5,116) Transfers to/from Other Statutory Reserves (322) Other Adjustments (104) (3,659) Movement In General Fund Balance (9,653) Adjust for earmarkings: Released sums earmarked to service budgets 2022-23 33,893 Revenue Budget 22-23 – transferred to General Fund (2,482) Contributions to earmarked reserves 2022-23 (18,413) 12,998 Revenue Budget Underspend/(Overspend) 3,345 Balance Sheet The Balance Sheet summarises the Council’s assets and liabilities as at 31 March 2023 and explanatory notes are provided. The net worth of the Council has increased by £262.520m from £497.663m as at 31 March 2022 to £760.183m as at 31 March 2023. The major changes are set out in the table below. Main Balance Sheet Changes 31/03/2022 £000 31/03/2023 £000 Change £000 Main Reason Long Term Assets 717,383 979,659 262,276 Revaluation of fixed assets and substantial increase of pension debtor due to an increase in investment returns. Current Assets 122,842 90,682 (32,160) Reduction in cash balances in comparison to previous year which was particularly high due to timing of funding received prior to year end. Current Liabilities (66,513) (68,526) (2,013) Increase in short term creditors offset by a decrease in short term borrowing. Long Term Liabilities (276,049) (241,632) 34,417 Reduction in long term borrowing due to the early repayment of loans during the year. Total 497,663 760,183 262,520 Provisions The Council has provisions totalling £3.894m on the Balance Sheet as detailed in Note 29 to the Accounts. The larger provisions, those £0.250m or over, are summarised below. £2.336m for landfill sites. A provision for landfill sites was created in 2014-15 reflecting the Council’s liability for restoration and ongoing maintenance in respect of landfill sites operated by the Council at
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 14 Glengorm, Gartbreck and Gott Bay. These have been provided for based on the net present value of estimated future costs. £0.865m for NPDO and Hub DBFM Payments. This provision is held in relation to disputed performance deductions and unbilled utility costs. Pension Asset The Council is required to account for its share of the Strathclyde Pension Fund assets and liabilities. The information included in the Accounts is provided by the Pension Fund actuaries following the annual valuation of the Fund. The Council’s share of the assets of the Strathclyde Pension Fund have been assessed on an actuarial basis using the projected unit method, an estimate of the pensions that will be payable in future years dependent on the assumptions about mortality rates, salary levels etc. The asset relates to benefits earned by existing or previous employees up to 31 March 2023. There has been a significant change in the pension valuation from a £4.634m asset in 2021-22 to a £232.073m asset in 2022-23. This is as a result of investment returns being greater than anticipated by our actuaries leading to positive return on assets. The pension liability or asset can fluctuate significantly year on year. The table below shows the pension liability or asset over the last three years. Further detail on the pension estimates are included within Note 31. Pension (Liability)/Asset at the end of the financial year 2020-21 £000 2021-22 £000 2022-23 £000 Pension (Liability)/Asset (82,314) 4,634 232,073 Borrowing During 2022-23 the Council’s external borrowing reduced by £35.566m from £179.539m as at 31 March 2022 to £143.973m as at 31 March 2023. The reduction was due to the early repayment of PWLB loans during the year in order to receive a discount and achieve an overall treasury gain. The Council was under borrowed by £38m at 31 March 2023. This was due to higher than normal levels of cash balances partly due to slippage in the capital programme meaning there was no requirement to borrow at this stage. The Council’s 2022-23 ‘Treasury Management Strategy and Annual Investment Strategy’ was approved at the full Council meeting on 23 February 2023 and outlines the Council’s capital prudential and treasury indicators. Statement of Movement in Reserves This Statement shows the movement on the different reserves held by the Council, analysed into usable reserves (resource backed reserves which can be used to fund expenditure) and unusable reserves (required purely for accounting purposes and are not backed by resources). The balance of unusable reserves has increased by £271.850m from £394.483m as at 31 March 2022 to £666.336m as at 31 March 2023. The main reason for this movement is the increase in the pensions reserve noted earlier in this commentary plus smaller accounting adjustments required through the Capital adjustment account and revaluation reserve. The balance of usable reserves has decreased by £9.331m from £103.177m as at 31 March 2022 to £93.847m as at 31 March 2023. This is due to a reduction in the General Fund of £9.653m offset by small increases in the Capital Fund outlined in Note 34.1 and the Repairs and Renewals Fund outlined in Note 34.2.
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 15 In respect of the General Fund Balance movement, there has been a decrease of £9.653m from a balance of £96.081m to £86.428m and the detail on the movement in the balance is summarised within the table below. Movement on General Fund Balance £000 Balance on General Fund 31 March 2022 96,081 Revenue Budget 2022-23 – transfer to General Fund 2,482 Released sums earmarked to service budgets 2022-23 (33,893) Contributions to earmarked reserves 2022-23 18,413 Overall budget underspend as noted above 3,345 Balance on General Fund 31 March 2023 86,428 General Fund Balance The chart below shows what is included within the General Balance as at 31 March 2023 with a comparison to the position as at 31 March 2022. General Fund Balances as at 31 March 2022 and 31 March 2023 An analysis of the earmarked balances are shown in the chart below. Earmarked Balances held in the General Fund as at 31 March 2023 0 5 10 15 20 Regeneration Projects Asset Management Fund Investment in Affordable Housing Strategic Housing Fund Unspent Grant and Third Party… Capital Projects Earmarked Reserves (£ Millions)
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 16 Group Accounts The Group accounts include Dunbartonshire and Argyll & Bute Valuation Joint Board, Strathclyde Partnership for Transport and Strathclyde Concessionary Travel Scheme Joint Committee as Associates as the Council have “significant influence” over their financial and operating policies. Live Argyll is a wholly owned subsidiary of Argyll and Bute Council and is consolidated within the group accounts on a line by line basis. In addition, the Council’s Common Good Funds have been fully consolidated into the Group Accounts and Note 37 gives further details on the Council’s Common Good Funds. The effect of inclusion of the Associates, Subsidiary and Common Good Funds on the Group Balance Sheet is to increase both reserves and net worth by £34.414m. This gives an overall net asset position for the Group of £794.597m, an increase of £271.366m from the previous year. The most significant increase is in the pension position of £235.901m and the increase in the General Fund Balance as noted earlier in the commentary. The Argyll and Bute Integration Joint Board has responsibility for all health and social care functions relating to adults and children and will oversee the strategic planning and budgeting of these, together with corresponding service delivery for the residents of Argyll and Bute. Argyll and Bute Council contributed £74.391m towards the Argyll and Bute Integration Joint Board in the 2022-23 financial year. All transactions are accounted for and shown within the single entity statements and the IJB are treated as a Joint Venture within the Group Accounts therefore a share of their overall surplus and net assets have been recognised in the Group Statements. 6. KEY FINANCIAL INDICATORS The financial indicators outlined below have been developed to assist the reader in assessing the performance by the Council over the last financial year and the affordability of its ongoing commitments. Key Financial Indicators Financial Indicator 2021-22 2022-23 Comment Unallocated General Fund Balance as a proportion of next year’s Annual Budgeted Net Expenditure 2.70% 2.45% Reflects the level of funding available to manage financial risk/unplanned expenditure. This includes the 2% contingency. The 2022- 23 position is slightly less than 2021-22 however still confirms there are sufficient reserves to meet any unplanned expenditure. Movement in the Unallocated General Fund Balance £0.5m (£0.6m) Reflects the extent to which the Council is using its Unallocated General Fund Balance (excluding contingency). A small decrease in the 2022-23 balance reflects the Council moving back towards pre-COVID levels of reserves. In-year Council Tax collection rate 96.28% 96.82% Reflects the Council's effectiveness in collecting Council Tax debt compared to a target of 96%. The target continues to be exceeded. Ratio of Council Tax Income to Overall Level of Funding 19.08% 17.76% Reflects the capacity of the Council to vary expenditure by raising Council Tax income. Actual Outturn compared to budgeted expenditure £1.630m 0.59% £3.345m 1.09% A measure of how the final outturn compares to the budgeted position. The surplus is a
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 17 Financial Indicator 2021-22 2022-23 Comment reflection of the effectiveness of the Council’s financial management. Capital Financing Requirement (CFR) for the current year £307.100m £291.780m Measurement of requirement to borrow for capital purposes. The small reduction in 22- 23 reflects the level of slippage within the capital programme and high cash levels meaning there is little requirement to borrow. External Debt Levels for the current year £177.934m £142.536m Actual borrowing for capital investment levels. Reduction in 2022-23 due to the early repayment of PWLB loans at a discounted rate to achieve a treasury gain. Ratio of financing costs to net revenue stream 3.37% 6.26% Measures the percentage of income that has been committed towards meeting the costs of borrowing. The more income needed to fund financing costs the less that is available to meet other revenue expenditure. 7. OUTLOOK A five year financial outlook informing Council of the estimated budget gap covering the period 2023-24 to 2027-28 using best case, worse case and mid-range scenarios was kept up to date during 2022-23 and presented to the Policy and Resources Committee in May, August, October and December 2022. Preparing any forward looking financial outlook is challenging due to the levels of uncertainty, for example the level of Scottish Government Grant, the impact of rising inflation and the uncertainty of pay awards being agreed before the budget setting process. The assumptions used to inform the outlook are reviewed, updated and reported regularly. The Council has a strong track record in financial management as recognised by previous years annual external audit reports and the Council’s Best Value report issued in May 2020. The chart below shows the cumulative budget gap over the next five years as reported to the Policy and Resources Committee on 11 May 2023. Cumulative Budget Gap 2024-25 to 2028-29 as reported on 11 May 2023 Budget Strategy As part of the Budget Outlook report presented to Policy and Resources Committee on 16 June 2022 it was agreed that a cross party Budget Working Group (BWG) be established comprising six elected
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 18 members from the administration, three elected members from the opposition and two Trade Union representatives. The BWG’s role was to engage with officers and provide a sounding board to assist in the development and identification of savings options. A further report was presented to Policy and Resources Committee on 13 October 2022 which set out the approach to the 2023-24 revenue budget process and identification of savings to balance the 2023- 24 budget. New savings options were identified by officers and presented to the BWG at meetings held on 7 September 2022, 3 November 2022 and 20 December 2022. The BWG agreed a suite of options which were presented to the Policy and Resources Committee on 19 January 2023 which would deliver £9.443m in savings in 2023-24, some were one-off and some were recurring. This figure was refined further and the savings options included within the budget pack totalled £9.426m. The Council continues to be committed to developing multi-year savings proposals with a focus on longer term planning. As part of the 2023-24 budget setting process savings that required more detailed work that could be considered in future years were also identified and these are already being explored as part of the 2024-25 budget setting process. Once again the Council has agreed to the creation of a cross party BWG for the 2024-25 budget process. The Council has also created a budget simulator which goes live on 19 June 2023 for a period of 8 weeks. This will allow the public to engage with the Council and understand potential implications of budget decisions at a high level. The budget simulator is presented at activity level and allows the user to reduce or increase spending across service areas, with supporting narrative the explains the consequences of the choices being made. There is also a section on income generation including Council Tax and fees and charges where the user can indicate whether they would be willing to pay more in order to minimise reductions to Council Services. This consultation will not only assist officers and Members when looking at budget options but will also assist the Community in understanding the difficult choices the Council faces with continued real term settlement reductions from Scottish Government. COVID Pandemic While the COVID pandemic is now less apparent much work relating to recovery and renewal is still being undertaken. The Council still have COVID related funding as we move into financial year 2023-24 including the Recovery and Renewal Fund, Local Authority Covid Economic Recovery Fund monies (as reported to Policy and Resources Committee on 8 December 2022) as well as a provision for capital contract increases. We are experiencing significant increases in prices for capital works due to issues such as disruptions to the supply chain for both labour and materials and longer lead-in times in relation to the construction sector and material availability. Cost of Living Crisis The ‘cost of living crisis’ refers to the fall in ‘real’ disposable incomes (that is, adjusted for inflation and after taxes and benefits) that the UK has experienced since late 2021. It is being caused predominantly by high inflation outstripping wage and benefit increases. As well as affecting individuals, the cost of living crisis is having a significant impact on Council services. At the time of producing the accounts the current CPI was at 8.7% in the 12 months to April 2023 and while this has fallen marginally compared to a rate of 9% in April 2022 it is still high. The Bank of England aims to keep the CPI rate of inflation at 2% plus or minus 1% (i.e. between 1% and 3%). As a result of the rising inflation, the Council is seeing significant increases in all areas of supplies, but specifically in utilities, food and fuel costs and it will be extremely challenging to contain spending within current resources.
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 19 These cost of living increases come at a time when the Scottish Government Resource Spending review published on 31st May 2022 advises that the funding to Local Government will remain as flat cash until 2026-27. Rural Growth Deal Our £70m Rural Growth Deal is about turning economic potential into a successful future for Argyll and Bute. It is about investing in initiatives that will turn the area’s fantastic natural resources and business innovation into a thriving local economy. The Council signed the Heads of Terms in February 2021 and is working on produced the fully deal documentation, which includes a business case for each of the themes within the deal. The Council have already submitted 2 Outline Business Cases for Government feedback and are progressing well with completion of the other business cases. It is anticipated that the full deal will be signed early in 2023. The project themes in the deal are as follows: Marine Tourism/Place Programme OBC Low Carbon Economy - Islay Rural Skills Accelerator Housing – Isle of Mull and Isle of Islay Clyde Engineering & Innovation Centre West Coast UAV Marine Aquaculture Programme. Regular updates on progress are posted on the website, see link: Rural Growth Deal (argyll-bute.gov.uk). UK Government Levelling Up Agenda Levelling Up Fund The UK Government’s Levelling Up Fund was announced by the Chancellor at the 2020 Spending Review, is worth £4.8 billion and is intended to support capital investment projects in town centre and high street regeneration, local transport projects, and cultural and heritage assets which must be bid for via a competition. The fund focuses investment on regeneration projects that require up to £20m of funding. For higher-value transport schemes, there is also scope in securing investment in larger projects up to £50m. The Council submitted two bids (£20m regeneration bid and £50m transport bid) to the Levelling Up Fund round 2 in the summer of 2022. It was disappointing to be advised that our bids were unsuccessful. In Scotland, only 30 of the 54 bids submitted were successful and officers are assessing the feedback from Government. UK Government has announced a further round of funding and the Council will be considering what projects to bid for in this round. The bid process is extremely competitive and our wide geography within Argyll and Bute makes it challenging to meet the criteria, however, this is an opportunity for transformational funding and it will be the intention to submit bids. The UK Government has still to announce the criteria and deadline for round 3 of the Fund. Shared Prosperity Fund (UKSPF) The UKSPF is a successor to the previous EU structural funds, it is viewed as a central pillar of the UK Government’s Levelling Up agenda. The overarching aim of the UKSPF is to build pride in place and increase life chances across the UK. The project / programme activities outlined in the Argyll and Bute UKSPF Investment Plan are all aligned to three key investment priorities: communities and place; supporting local business; and people and skills, where each priority has predefined interventions, outputs and outcomes. In addition to core UKSPF monies, the investment plan includes a focus on ring-fenced ‘Multiply’ funding to support the delivery of an area-based adult numeracy programme.
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 20 Argyll and Bute Council received an allocation from the UKSPF of just under £4.5m to support delivery over three financial year, specifically the final three months of 2022-23 and the next two financial years, 2023-24 and 2024-25, until the end of March 2025 are outlined in Table 1. A list of the projects that will be funded are summarised in Appendix 1, Tables, 1a, 1b and 1c. There are 19 interventions (projects) under the Core UKSPF. All have begun planning with five started delivery. All interventions are expected to have commenced by June 2023. Multiply has three interventions at present with one underway. A procurement exercise for the balance of the funding will take place in June with delivery expected to commence in August 2023. Further information on the projects are included within the report to the Environment, Development and Infrastructure Committee on 1 June 2023, see link: ARGYLL AND BUTE UK SHARED PROSPERITY FUND INVESTMENT PLAN UPDATE.pdf (argyll-bute.gov.uk). Risks The Council’s Strategic Management Team (SMT) actively manage strategic risks via a six monthly review of the Strategic Risk Register (SRR) which adopts established risk management arrangements including reviewing current mitigating measures and identifying key actions to further mitigate them. These actions are designed to be consistent with the work required to deliver services which are aligned to the Council’s objectives through the Council’s strategic and service plans. Furthermore departmental management teams review their operational risk registers (ORR) on a quarterly basis with all red risks identified in ORRs being reported to the SMT to ensure they are sighted on all emerging high priority risks. The SRR currently has 14 strategic risks which are categorised using a RAG (Red, Amber, Green) Status based on the residual impact and likelihood of crystallisation after accounting for mitigation measures. There are currently four risks classified as red as set out in the diagram below which also summarises the current mitigating actions. These are issues that the Council continues to manage through programmes of work such as the Rural Growth Deal, and the Levelling Up Fund, also the progression of a new Waste Strategy with a particular focus on the 2025 ban on Biodegradable Municipal Waste, reviewing contingency plans and disaster recovery plans in relation to Cyber Security and addressing the Housing Emergency through a Housing Strategy and Investment Plan. •Maximise external funding •Rural Growth Deal •Levelling Up Fund •Promote and market Argyll and Bute Population, Infrastructure and Economic Decline •Developing options for new Waste Strategy •Planning for impact of Bio-degradable Municipal Waste Ban 2025 •Planning for impact of Scottish Deposit Return SchemeWaste Management •Contingency Planning •Raising Cyber Security awareness •Disaster Recovery Plan •Work with Scottish Government Cyber Resilience Team Cyber Security •Housing Strategy and Investment Plan •Housing Delivery Group established •Islands Programme Award of Funding for worker accomodation Housing Availability
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Management Commentary www.argyll-bute.gov.uk __________________________________________ Page 21 8. CONCLUSION The Council has continued to have good financial planning arrangements in place in 2022-23. We have managed the additional inflationary pressures arising from the cost of living crisis and taken the opportunity to repay borrowing at a significant discount which ensured that we operated within budget in 2022-23. It is recognised that the current cost of living crisis, along with real term reductions in Scottish Government core revenue grant is continuing to present significant financial challenges for all local authorities, however, our council is in a strong position to manage the financially challenging times. The Council are committed to deliver the best services to the people of Argyll and Bute within the available resources and to continue to support local business through the cost of living crisis. 9. ACKNOWLEDGEMENTS We would take this opportunity to acknowledge the significant effort in producing the Annual Accounts and to record our thanks to both Elected Members and staff for their continued hard work and support. Kirsty Flanagan Section 95 Officer 29 June 2023
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Statement of Responsibilities for the Annual Accounts www.argyll-bute.gov.uk __________________________________________ Page 22 THE AUTHORITY'S RESPONSIBILITIES The Council is required: to make arrangements for the proper administration of its financial affairs and to ensure that one of its officers has the responsibility for the administration of those affairs (Section 95 of the Local Government (Scotland) Act 1973). In this Authority, that officer is the Executive Director; to manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets; to ensure the Annual Accounts are prepared in accordance with legislation (The Local Authority Accounts (Scotland) Regulations 2014), and so far as is compatible with that legislation, in accordance with proper accounting practices (section 12 of the Local Government in Scotland Act 2003); to approve the Annual Accounts for signature. SECTION 95 OFFICER RESPONSIBILITIES The Section 95 Officer is responsible for the preparation of the Council's Annual Accounts in accordance with proper practices as required by legislation and as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (The Code). In preparing the Annual Accounts, the Section 95 Officer has: selected suitable accounting policies and applied them consistently; made judgements and estimates on a reasonable basis; complied with legislation; complied with the Local Authority Accounting Code of Practice 2022-23 (in so far as it is compatible with legislation). The Section 95 Officer has also: kept adequate accounting records which were up to date; taken reasonable steps for the prevention and detection of fraud and other irregularities. I certify that the Annual Accounts give a true and fair view of the financial position of the Council and its group at the reporting date and the transactions of the Council and its group for the year ended 31 March 2023. Kirsty Flanagan Section 95 Officer
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Annual Governance Statement www.argyll-bute.gov.uk __________________________________________ Page 23 1. BACKGROUND AND SCOPE OF RESPONSIBILITY Argyll and Bute Council’s (the Council) governance framework includes the systems, processes and culture by which the Council is controlled, engages with communities and monitors the achievement of strategic objectives. The Council conducts its business in accordance with the law and proper standards. The Council has a duty to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to the economic, efficient and effective use of public money. The system of internal control is a key part of the framework and is designed to manage risk to an acceptable level. In discharging these responsibilities, the Council has put in place proper arrangements for the governance of its affairs and the stewardship of the resources at its disposal. The Council has approved and adopted a Local Code of Corporate Governance (the Code) which is consistent with the principles and requirements of the CIPFA/SOLACE revised Framework for ‘Delivering Good Governance in Local Government. This Statement explains how the Council has complied with the Code and meets the requirements of current good practice. 2. THE GOVERNANCE FRAMEWORK The Code details how the Council will demonstrate compliance with the fundamental principles of corporate governance for public sector bodies. The seven key principles of our governance arrangements in 2022/23 are described in the Code, along with our supporting principles and key aspects of our arrangements to ensure compliance. 1. Behaving with integrity, demonstrating strong commitment to ethical values, and respecting the rule of law. We have four values, which underpin all that we do and provide a sound basis to achieve transformation to ensure we meet the challenges of the future and deliver quality services. These values are that we have a workforce which is: Caring Committed Collaborative Creative We have developed and communicated an Ethical Framework within the Council's Constitution, which defines standards of behaviour for Members and staff. Protocols for Member/Officer relations are also detailed within the Constitution. The Councillors’ Code of Conduct is set out at a national level, applying to all members in Scottish local authorities and is incorporated into the Council’s Constitution as part of the ethical framework which also includes a protocol for the Monitoring Officer. A Register of Members Interests is publically available for inspection. In addition, the Constitution has a section on conduct at meetings and meeting agendas require declarations of interest to be made where appropriate. Standing orders for meetings are included within the Council’s constitution and training and support is provided to members on their role in Council committees. Anti-fraud and whistleblowing policies are in place and the Council has adopted the Scottish Public Services Ombudsman’s (SPSO’s) Model Complaints Handling Procedure. The Council complies with CIPFA’s Statement on the Role of the Chief Financial Officer in Local Government. In addition, Professional advice on the discharge of statutory social work duties is provided to the Council by the Chief Social Work (CSWO). A structure of governance and framework across our day to day activities and which supports accountability, control, risk management and appropriate overview of the Council are outlined in the diagram below:
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Annual Governance Statement www.argyll-bute.gov.uk __________________________________________ Page 24 2. Ensuring openness and comprehensive stakeholder engagement. We have established clear channels of communication with the community and other stakeholders through our Communication Strategy. Key mechanisms include: Consultation Diary The Council has developed a consultation section on its website which hosts all consultations run by the Council and includes a section which publicises the results and/or outcome of the consultation and the resultant decisions that have been taken, showing how they were informed by the consultation process. This is part of Decision Making / Procedural Council and Committee Structure Council and Committee Terms of Reference Council and Committee Standing Orders Scheme of Delegated Functions Standing Orders Relating to Contracts Councillor's Code of Conduct Corporate Governance Executive Leadership Team and Senior Management Team Risk Management Integrity HR and Individual Capability Strategic Planning Performance Management Framework Community Planning and Empowerment Stakeholder Engagement Financial Governance Internal Control ALEO Governance Scheme of Delegation ALEO Governance Framework Risk and Governance Reporting Financial and Operational Performance ALEO Risk Register Asset Governance Corporate Asset Management Strategy Corporate Asset Managment Plan and Capital Plan Records Management Information Management and Security Local Development Plan ICT and Digital Strategy Major Programmes/Projects Capital Investment Programme Conservation Area Regeneration Scheme (CARS) Projects Campbeltown, Helensburgh, Oban, Rothesay & Dunoon (CHORD) Projects Marine Asset Management Plan Rural Growth Deal Annual Status and Options Report External and Internal Audit and other regulatory inspections Constitution, Governance, Risk Management and Accountability
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Annual Governance Statement www.argyll-bute.gov.uk __________________________________________ Page 25 our commitment to You Said, We Did information sharing for the public. Consultations provide communities with an opportunity to get involved with wide ranging aspects of the council’s work and life in Argyll and Bute. These include for example, Campbeltown Flood Scheme, Oban Bay Harbour, Roads Reconstruction, Helensburgh Waterfront Development, Community Council Review, Free Period Products Provision and Electrical Vehicle Chargers. Keep in the Loop Service Over 10,500 customers subscribed to receive notifications across the range of services. 'Myaccount' is a secure sign-in service for accessing online public services in Scotland. It provides the ability to set up an online account and use it to access a growing range of online public services, Scotland-wide, including Argyll and Bute Council. Currently 15,399 customers have signed up to this service and it allows customers to access and personalise their interaction with the Council on a range of services. Public Performance Reporting The Council’s website makes all performance information available to the public. This includes information on performance scorecards, budgets and other service related information. This promotes open accountability to the public for its performance against agreed policies and standards. Best Value is the term applied to the means by which the Auditor General and Accounts Commission audits local government on good governance, managing resources, improvement, managing change and delivering services that improve the lives of local people. In 2022 the Accounts Commission announced that its approach to reporting on Best Value is changing from BV3 audits and will now report annually on specific themes from October 2023. This is intended to facilitate the exchange of ideas and performance data, as well as offering a detailed analysis of a specific aspect of the work of all councils. The first theme will be leadership. This will be accompanied by shorter Section 102 reports for each Council over a four year period. The Council is currently developing a refreshed Corporate Improvement Plan to build on the now completed BV3 Action Plan and this will be brought forward to the Audit and Scrutiny Committee later in 2023. Accessibility Online service provision is only effective if it is easy to access. In order to ensure maximum accessibility for everyone and meet our equalities responsibilities, the Council’s website is currently being upgraded to ensure conformance with the latest WCAG 2.2 Guidance and will be relaunched in May 2023. In December 2022 the website had a 98% rating (excellent) and was the 14th highest ranking Council in the UK. Our current and new websites also have the Reachdeck accessibility toolbar for any user seeking additional assistance such as text to speech or translation facilities. Community Engagement The Council supports good community engagement through its recently established Engagement Group led by a Head of Service. On this group sit those officers with expertise in engagement including those from Corporate Communications and the Communities & Partnership Team. The Councils Communications Team has produced an engagement toolkit for services to use, and the council’s Communities & Partnership Team has resources and expertise to support hard to reach groups, community organisations and remote communities to have a voice in decision making alongside advice and training on best practice in community engagement. In addition to community engagement, the council’s Community Development Officers (within the Communities & Partnership Team) provide a range of wider training and resources to help build the knowledge, skills and confidence of community groups alongside funding support to help empower community organisations to take forward priority projects and activities in their area. The Council continues to promote the Community led action plan and toolkit (developed in partnership with Scottish Community Development Centre) to help support communities interested in developing a local Community-led Action Plan. The Community Planning and Community Development Team supports communities to submit Participation Requests to the Council, in line with Part 3 of the Community Empowerment (Scotland) Act 2015. The Council also oversees the work of Community Learning (Youth Work and Adult Learning) through its
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Annual Governance Statement www.argyll-bute.gov.uk __________________________________________ Page 26 collaboration with its Arms-length External Organisation (ALEO) partner Live Argyll. Council/Committee Meetings Meetings are always held in public, unless one of the statutory exemptions in the Local Government (Scotland) Act 1973, schedule 7A applies to the content of the report. Agendas for and minutes of meetings are detailed on the Council’s website. When schedule 7A applies papers are adjusted to ensure that the maximum amount of content is in the public domain. The Council’s Constitution defines the roles and responsibilities of the administration, committees, scrutiny and officer functions, with clear delegation arrangements and protocols for effective communication. The Standards Commission Advice Note for Councillors on Distinguishing between their Strategic Role and any Operational Work has previously been included in an Elected Member Seminar and is hosted on the Members Resource page on the Hub for ease of reference. 3. Defining outcomes in terms of sustainable economic, social, and environmental benefits. Our Corporate plan sets out our, and our community planning partner’s, vision for Argyll and Bute’s economic success to be built on a growing population. It also defines our mission “To make Argyll and Bute a place people choose to live, learn, work and do business” and establishes our outcomes, priorities and approach to delivering on our shared ambition with our community partners. We have a Performance Improvement Framework (PIF) that ensures performance is integral to the work of the Council. The PIF is focused not just on measuring what we do but on measuring the difference we make in terms of our outcomes. Asset management planning and capital investment is structured to consider and balance the combined economic, social and environmental impact of policies and plans when taking decisions about service provision. The Council has put arrangements in place to comply with key elements of the Community Empowerment Act. In determining how services and other courses of action should be planned and delivered the Council is increasingly engaging with internal and external stakeholders. Community benefit is an important consideration in the procurement of goods and services. During 2022/23 the Council has acknowledged the effects of the ‘Cost of Living Crisis’ within Argyll and Bute and as a result the Flexible Food and Fuel fund contract has been extended until March 2025, ensuring that the most vulnerable low income households and those using foodbanks in our area can access short-term grants to cover the cost of food and fuel and longer term support through provision benefit maximisation, money advice and energy advice services. In addition, this year the Council has issued 8,000 Scotland Loves Local Gift Cards to low income households in the year ensuring the £960,000 loaded onto the gift cards is spent in local businesses in Argyll and Bute. The Council has also provided a one-stop-shop webpage where individuals and families can access energy advice, money advice and links to the services the Council provides in this area and those provided by third sector partner organisations. In 2022 and for the fourth year in a row, Argyll & Bute Council successfully reduced their operational carbon emissions. The Council’s carbon footprint has reduced by around 33% in emissions since recording commenced in 2015/16. There are a number of factors that have contributed to this reduction such as direct interventions to make buildings more energy & heat efficient, replacing traditional lightbulbs with LED, moving to electric or hybrid vehicles and treating municipal waste in different ways. Integrated impact assessments as well as environmental, sustainability and island implications are considered during the decision making process to promote fair access to services. 4. Determining the interventions necessary to optimise the achievement of the intended outcomes. Decision makers receive detailed information indicating how intended outcomes would be achieved together with the implications associated with the proposals covering financial, risks and mitigations, integrated impact assessment, acting sustainably, carbon management, island proofing, and changes to schemes, by way of the compulsory sections of the Committee report.
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Annual Governance Statement www.argyll-bute.gov.uk __________________________________________ Page 27 The Council’s Executive Leadership Team (ELT) meet regularly with the administration to discuss their key priorities and requirements for decision making in addition there is regular survey and feedback on their needs and a regular review of governance arrangements to ensure that decision making is fully supported. In determining how services and other courses of action should be planned and delivered the Council is increasingly engaging with internal and external stakeholders. Community benefit is an important consideration in the procurement of goods and services. The Council fosters effective relationships, collaborative working and contractual arrangements with other public, private, and voluntary organisations in delivering services that meet the needs of the local community as stated in the Council’s Corporate Plan 5. Developing the entity’s capacity, including the capability of its leadership and the individuals within it. Elected Member Development The Council has signed up to the Improvement Service’s Continuing Professional Development Framework for Elected Members. All Elected Members are provided with opportunities to progress personal development plans so that individual training needs and aspirations are identified and support provided as appropriate. This is complemented by a comprehensive seminar and workshop programme which addresses a wide range of topics and strategic issues. Additional training was undertaken by Elected Members in relation to the technology, knowledge and skills necessary to support the transition to a virtual environment including webcasting of strategic Committee meetings and the operation of meetings on a hybrid basis, enabling a mixed attendance of members being physically or virtually present. Officer Development The Council supports officer development through a structured approach, driven by the values set out in the Corporate Plan and a behavioural competency framework. The Council has Argyll and Bute Manager and Leadership Programmes, which ensure that all employees who have management responsibilities are knowledgeable and effective in delivering services within the priority management policies and procedures of the Council, including finance, performance and people management. The Leadership Programme ensures that senior and aspiring leaders in the organisation have support to develop their leadership behaviours and to improve their overall impact and performance across the organisation. 6. Managing risks and performance through robust internal control and strong public financial management. Internal Financial Control Our standing orders, financial instructions, scheme of delegation and supporting procedure notes/manuals clearly define how decisions are taken and the processes and controls in place to manage risks. These are reviewed and updated on an annual basis. We ensure compliance with relevant laws and regulations, internal policies and procedures, and that expenditure is lawful. The Council’s Monitoring Officer advises on compliance with our policy framework, ensuring that decision making is lawful and fair. Furthermore the Council has a designated Data Protection Officer and all services have Information Asset Registers along with appropriate guidance on how data should be managed. Our financial management arrangements conform to the CIPFA Statement on the Role of the Chief Financial Officer and we ensure that our independent Audit and Scrutiny Committee undertakes the core functions identified in CIPFA’s Audit Committees – Practical Guidance for Local Authorities. The Council has a proactive, holistic approach to tackling fraud, theft, corruption and crime, as an integral part of protecting public finances, safeguarding assets, and delivering services effectively. It is based upon the national counter fraud standard CIPFA’s Code of Practice on ‘Managing the Risk of Fraud and Corruption’. The Council has a system of internal financial control designed to manage risk to a reasonable level. It is based on a framework of regular management information, financial regulations, administrative procedures (including
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Annual Governance Statement www.argyll-bute.gov.uk __________________________________________ Page 28 segregation of duties), management supervision, and a system of delegation and accountability. Development and maintenance of the system is undertaken by officers within the Council and the named bodies mentioned below. Internal Financial Controls and Prevention Are these in Place? Comprehensive budget systems Financial and budget monitoring systems Financial and Performance reporting systems Clearly defined Capital Expenditure guidelines Project Management processes and disciplines An effective Internal Audit Section An effective Counter Fraud Team Internal controls cannot eliminate risk of failure to achieve policies, aims and objectives and can therefore only provide reasonable and not absolute assurance of effectiveness. This annual review also covers the other bodies whose activities are incorporated into our Group Accounts and reliance is placed on the formal audit opinion contained in the financial statements of each individual body. Dunbartonshire and Argyll and Bute Valuation Board Strathclyde Partnership for Transport Strathclyde Concessionary Travel Scheme Joint Committee Live Argyll Argyll and Bute Integration Joint Board The Council’s risk management processes are well developed. In particular the: Strategic Risk Register is updated twice a year and approved by the SMT Chief Executive presents the Strategic Risk Register to the Audit and Scrutiny Committee on an annual basis Operational Risk Registers are updated quarterly by departmental management teams. Internal Audit will perform an audit of compliance with risk management arrangements every three years. The CIA performs an annual strategic risk assurance mapping exercise. 7. Implementing good practices in transparency, reporting, and audit to deliver effective accountability Internal Audit The Council and its Group bodies have internal audit functions, which operate to Public Sector Internal Audit Standards. The work of internal audit is informed by an analysis of the risk to which the Council and its Group bodies are exposed, with annual internal audit plans prepared based on that analysis. The Council's Audit and Scrutiny Committee endorses the preparation methodology and annual internal audit plan and monitors the performance of Internal Audit in completing the plan. In addition, the Council has developed a hybrid meeting facility enabling physical and virtual attendance at meetings with a public broadcast function so that members of the public can see and hear meetings of the Council’s strategic committees live increasing openness and transparency.
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Annual Governance Statement www.argyll-bute.gov.uk __________________________________________ Page 29 The Chief Internal Auditor (CIA) provides the Audit and Scrutiny Committee with an annual report on internal audit activity in the Council and an opinion of the assurance can be taken regarding the systems of governance and internal control and whether they are operating effectively. This is an independent and objective opinion of the CIA based on work carried out in conformance with the Public Sector Internal Audit Standards to fulfil statutory Internal Audit provision. Internal audit provides members and management of the Council with independent assurance on risk management, internal control and corporate governance processes. External audit has, and continues to, use the work of internal audit. The Annual Accounts and Report sets out the financial position in accordance with relevant accounting regulations. Review of the Adequacy of Effectiveness of the Council’s Governance Framework Work to deliver Argyll and Bute’s Covid Recovery Strategy and Action plan continued in 2022/23 with the same governance arrangements. Full details of the action plan is detailed in the document “Recovery, Renew and Restart”, which was approved by Councils Economic, Development and Infrastructure Committee. The Council has appropriate management and reporting arrangements to enable it to satisfy itself that its approach to corporate governance is adequate and effective in practice. The legislative framework of local government defines a number of posts which are primary to the Council’s governance arrangements. These include the Chief Executive, Pippa Milne fulfilling the role of Head of Paid Service. As Monitoring Officer, the Executive Director Douglas Hendry: oversees the implementation of the Code and monitoring its operation reports annually to the Council on compliance with the Code and any changes required to maintain it and ensure its effectiveness. Specific responsibilities are assigned to the Executive Director Kirsty Flanagan as the Council’s Chief Financial Officer (S95 Officer), to ensure that public funds are properly accounted for. In recognition of the significant role that the Chief Financial Officer has in relation to financial performance and the financial control environment, CIPFA has set out key principles that define the core activities and behaviours that belong to the role. These include, being a key member of the Leadership Team, being actively involved in and influencing decision making, and leading the delivery of good financial management across the whole organisation. The Council have appointed a Data Protection Officer in line with the requirements of the UK-General Data Protection Regulations and the Data Protection Act 2018. Covid Recovery Progress Report 2022/23 The Argyll and Bute Overarching Recovery Group (formed to lead this process with specific thematic groups focused on Council recovery, building back stronger communities, economic and social recovery, infrastructure and transportation, financial management and public health) continues to meet on a reduced frequency, reporting to the Executive Management Team and appropriate Committees. A number of the actions and priorities have been mainstreamed into operational service delivery, and the critical thematic groups which remain in place are building back stronger communities and economic and social recovery. These have been impacted by the cost of living crisis, higher fuel costs and other factors. Good progress has been made in delivering the Recovery document “Recovery, Renew and Restart” and a progress report will be prepared for consideration by the appropriate Committee late 2023. FINANCIAL SUSTAINABILITY It is anticipated the Scottish public sector will continue to face a very challenging short and medium term financial outlook with uncertainty over the level of Scottish Government funding. The one year financial settlements do not provide any degree of medium term certainty and ring-fencing of monies and additional policy commitments which are not always fully funded limit financial flexibility and create additional financial pressures.
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Annual Governance Statement www.argyll-bute.gov.uk __________________________________________ Page 30 The financial outlook continues to be impacted by the COVID-19 pandemic along with the UK exit from the European Union, the Russian invasion of Ukraine and actions on Russian owned entities which have resulted in significant price increases as well as disruptions to the supply chain and longer lead in times. These all have resulted in significant levels of inflation over the last year impacting on the prices of goods and services. The Council continues to provide financial estimates for future years with their medium term financial outlook covering a five year window to provide a longer term view of the Council’s estimated budget gap. Preparing any forward looking financial outlook is challenging due to the levels of uncertainty however the assumptions are reviewed regularly and updated with the outlook prepared to reflect a best case, worst case and mid- range scenario. The Council has a strong track record in financial management as recognised by previous year’s annual external audit reports and the Council’s Best Value report issued in May 2020. The Best Value report also recognises that the Council’s medium to long term financial strategy helps support financial planning arrangements. In addition to providing revenue and capital projections the Strategy also sets out the position in relation to the Council’s general fund reserve, the approach to managing the financial impact of inflationary pressures, approach to Treasury Management and the strategy to address budget gaps. HEALTH AND SOCIAL CARE INTEGRATION The Argyll and Bute IJB has been established as a separate legal entity from either Argyll and Bute Council and NHS Highland, with a separate board of governance. 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 sectors and 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 Argyll and Bute 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 as outlined in the Scheme of Integration has responsibility for the planning, resourcing and operational delivery of all integrated health and social care services within Argyll and Bute. The Council places reliance on the IJB’s framework of internal controls and similarly the IJB places reliance on the procedures, policies and operational systems of the Council and the Health Board. 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. The IJB has proportionate internal audit arrangements in place to provide independent assurance on risk management, corporate governance and the system of internal control. A risk based internal audit plan was carried out in 2022-23 and the IJB’s internal auditor has issued a formal annual report providing their independent opinion on the effectiveness of the IJB’s risk management, internal control and governance processes. The overall conclusion of the Internal Auditor is to provide a satisfactory level of assurance on the adequacy of internal controls and governance arrangements within the IJB. During 2022-23 the IJB has progressed a number of initiatives to develop its governance arrangements including improving the use of Directions, the completion of the new Joint Strategic plan and Workforce Strategy. It has also focused upon re-mobilising services following the pandemic, progressing its service transformation program and upon strategic development. It has focused on taking action to manage strategic risks during the year, particularly in relation to care home and care at home services. The financial position of the HSCP has also continued to improve. It repaid all of the debt it owed to the Council in 2021/22 and reported a significant underspend in 2022/23. The operating environment going forward does however remain challenging. The IJB approved a balanced budget for 2023/24 which initially indicated that additional funding from NHS Highland may be required during the year. This is now unlikely in the context of the confirmed underspend in 2022/23. That said, there remains a number of financial risks and challenges to deliver services within budget resource and to deliver the agreed savings.
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Annual Governance Statement www.argyll-bute.gov.uk __________________________________________ Page 31 UPDATE ON AREAS FOR DEVELOPMENT IDENTIFIED IN PREVIOUS ANNUAL GOVERNANCE STATEMENTS Previous Annual Governance Statement identified a number of areas for further development. A summary update for each area is provided in the table below. Area 2022/23 Update Continue to engage with the Scottish Government and other local authorities to determine the most efficient and effective way of ensuring the Council can provide a waste solution which complied with the 2025 Bio-degradable Municipal Waste Ban Specialist economic consultants now engaged on an options appraisal exercise to help inform the decision. This is to be reported to September’s Economic Development & Infrastructure committee. Update: The options appraisal completed and presented to EDI Committee in December 2022. The Council has formally written to the Scottish Government to request a time limited derogation in the Waste PPP area to September 2026 for the municipal solid waste landfill ban which is due to be implemented on 1 January 2026. The Council has commenced contract discussions with our Waste PPP Contractor regarding landfill ban compliance from 1 January 2026 should the time limited derogation not be granted. Enhance reporting of workforce planning to the Strategic Management Team and Elected Members ELT have agreed the new draft People Strategy, which will include our workforce planning strategy. This is in the process of being finalised for P&R Committee. Quarterly Health of the Organisation Reports are presented to DMTs, which include information on Workforce Planning - age profile, turnover, vacancies and attendance. A risk based Workforce Planning Matrix is used to prioritise actions and support. This is developed from detailed meetings with managers and presented in a strategic report to SMT. Elected members’ new priorities for performance reporting to strategic committees does not include workforce planning, but updates are provided to the Policy Lead regularly on key issues such as recruitment and retention. Continue to improve quality and accuracy of asset information which will benefit asset valuations, calculations for utilities costs and asset management Contract let and work underway to gather updated asset information for major buildings – new plans being drawn. Estates has continued to improve records with the property measurement contract providing new plans for properties. As part of the asset valuation process Estates are also building up property records and will use the details for the insurance valuation updates to be completed in 2022/23. Update: Valuations for Education properties completed in 22/23. This will be continued for general properties in 2023/24 and will also be beneficial for other projects where floorplans are required at short notice. Adopt the CIPFA Financial Management Code This action has been delayed due to resource issues and will be addressed during 2022/23 Completed in February 2023 ISSUES FOR FURTHER DEVELOPMENT The review of governance and internal control has identified the following areas for consideration during 2023/24, particularly in the context of continuous improvement within the Council: Continue to engage with the Scottish Government, other local authorities and our Waste PPP contractor to determine the most efficient and effective way of ensuring the Council can provide a waste solution which complies with the 2025 Bio-degradable Municipal Waste Ban (Head of Roads
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Annual Governance Statement www.argyll-bute.gov.uk __________________________________________ Page 32 and Infrastructure Services – March 2024 Further enhance reporting of workforce planning to the Strategic Management Team (Head of Customer Support Services – March 2024) Continue to Improve quality and accuracy of asset information which will benefit asset valuations, calculations for utilities costs and asset management (Head of Commercial Services – March 2024) Develop data/analytics business intelligence tool (Head of Customer Support Services – March 2024) Complete review of performance management (Head of Customer Support Services – March 2024) Complete the External Quality Assessment Framework (Head of Financial Services – March 2024) CONCLUSION The conclusion from the review activity outlined above and our opinion is that reasonable assurance can be placed upon the adequacy and effectiveness of Argyll and Bute Council’s systems of internal control and governance. Although areas for further improvement have been identified, the annual review demonstrates sufficient evidence that the Council’s Local Code of Corporate Governance is operating effectively and that the Council complies with that Local Code in all significant respects. Systems are in place to regularly review and improve governance and systems of internal control. Kirsty Flanagan Section 95 Officer
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The Remuneration Report www.argyll-bute.gov.uk __________________________________________ Page 33 BACKGROUND The Local Authority Accounts (Scotland) Regulations 2014 (SSI No.2014/200) require local authorities in Scotland to prepare a Remuneration Report as part of the annual statutory accounts. All information disclosed in the tables in this Remuneration Report were audited by Audit Scotland. All other sections within the Remuneration Report were reviewed by Mazars to ensure it is consistent with the Financial Statements. REMUNERATION POLICY AND ARRANGEMENTS Councillors The remuneration of councillors is regulated by the Local Governance (Scotland) Act 2004 (Remuneration) Regulations 2007 (SSI No 2020/26). The Regulations provide for the grading of councillors for the purposes of remuneration arrangements. There are 4 grades of councillor in each local authority for the purposes of payment of remuneration, the Leader of the Council; the Civic Head (Provost); senior councillors; and councillors. The Leader of the Council and the Provost cannot be the same person for the purposes of payment of remuneration. A senior councillor is a councillor who holds a significant position of responsibility in the Council’s political management structure. The Regulations also provide for the banding of local authorities. Argyll and Bute is in Band B and the Council has determined the level of remuneration for councillors within that banding. The salary that is to be paid to the Leader of the Council is set out in the Regulations. For 2022-23 the salary for the Leader of Argyll and Bute Council is £39,148. The Regulations permit the Council to remunerate one civic head. The Regulations set out the maximum salary that may be paid to that civic head. The Council’s civic head is the Provost and their remuneration is set at £29,361 which is the maximum allowed for local authorities in Band B. The Regulations also set out the remuneration that may be paid to senior councillors in addition to the Leader and Civic Head and the total number of senior councillors the Council may have. The maximum yearly amount that may be paid to a senior councillor is 75% of the total yearly amount payable to the Leader of the Council. The total yearly amount payable by the Council for remuneration of all its senior councillors shall not exceed £0.343m. The Council is able to exercise local flexibility in the determination of the precise number of senior councillors up to a maximum of 14 and their salary within these maximum limits. The Council’s policy is to pay a salary of £29,361 to each appointed policy lead. Chairs of Area Committees without a policy lead remit are paid a salary of £23,448. In 2022-23, Argyll and Bute Council had 11 senior councillors in the administration (excluding the Provost and the Leader). The total salary remuneration for senior councillors (excluding the Provost and the Leader) during 2022-23 was £0.293m. The Regulations also permit the Council to pay contributions or other payments as required to the Local Government Pension Scheme in respect of those councillors who elect to become councillor members of the pension scheme. Senior Employees The salary of senior employees is set by reference to national arrangements as well as local decisions on management structures and their associated remuneration levels. The Scottish Joint Negotiating Committee (SJNC) for Local Authority Services (Chief Officials) sets the salary levels for the Chief Executives of Scottish Local Authorities and also sets out the spinal column salary points for Chief Officers which local authorities can utilise in setting the salary levels for posts within their authority. Circular CO/152 sets the amount of salary for the Chief Executive of Argyll and Bute Council for 2022-23. The salaries of Executive Directors are paid at SCP 43 with Heads of Service being paid at SCP 29.
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The Remuneration Report www.argyll-bute.gov.uk __________________________________________ Page 34 COUNCILLORS’ REMUNERATION Councillors’ payments are made in accordance with the Local Governance (Scotland) Act 2004 (Remuneration) Regulations 2007 and The Local Government (Allowances and Expenses) (Scotland) Regulations 2007. The total amount of councillors’ remuneration paid by the Council during the year was: 2021-22 2022-23 Actual Members Allowances Actual £'000 £'000 480 Basic Councillor Salaries 476 65 Leader and Provost's Salary 66 199 Senior Councillor Salaries 258 4 Other Expenses and Allowances paid to Members 29 748 Total Allowances 829 The annual return of councillors’ salaries and expenses for 2022-23 is available for any member of the public to view at all Council libraries and public offices during normal working hours. It is also available on the Council’s website at http://www.argyll-bute.gov.uk/council-and-government/councillors-and- community-councillors.
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The Remuneration Report www.argyll-bute.gov.uk __________________________________________ Page 35 SENIOR COUNCILLORS’ REMUNERATION Additional disclosures are required for senior councillors’ remuneration. Senior councillors’ remuneration is in accordance with the Local Governance (Scotland) Act 2004 (Remuneration) Regulations 2007 which for the purpose of remuneration, grades Councillors as either the Leader of the Council, The Civic Head (Provost), senior Councillors or Councillors. Details of senior councillors’ remuneration are as follows:
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The Remuneration Report www.argyll-bute.gov.uk __________________________________________ Page 36 2021-22 Total Remuneration Senior Members Responsibility Salary, Fees and Allowances Taxable Expenses Total Remuneration £ £ £ £ 26,313 Councillor Rory Colville Policy Lead - Roads and Infrastructure Services and Chair of Mid Argyll, Kintyre & the Islands Area Committee from 22-10-20 3,715 - 3,715 - Councillor Garret Corner Chair of Mid Argyll, Kintyre & the Islands Area Committee from 24-11-22 18,059 - 18,059 - Councillor Maurice Corry Provost from 19-05-22 24,932 - 24,932 37,148 Councillor Robin Currie Leader from 24-09-20, Policy Lead for The Economy and Rural Growth from 22-10-20, 38,254 - 38,254 26,313 Councillor Mary-Jean Devon Policy Lead for Support Services from 22-10-20 3,715 3,715 21,938 Councillor Bobby Good Chair of Bute & Cowal Area Committee 3,098 - 3,098 26,313 Councillor Kieron Green Policy Lead for Health and Social Care 28,648 - 28,648 - Councillor Amanda Hampsey Policy Lead for Care Services from 19-05-22 24,932 - 24,932 - Councillor Andrew Kain Policy Lead for Roads and Transport and Chair of Oban, Lorn & the Isles Area Committee from 19-05-22 24,932 - 24,932 27,862 Councillor David Kinniburgh Provost from 26-11-20, Policy Lead for Planning and Regulatory Services from 22-10-20 3,934 - 3,934 - Councillor James Lynch Leader of the Largest Opposition Group from 19-05-22 22,675 - 22,675 - Councillor John McAlpine Policy Lead for Community Planning and Corporate Services and Chair of the Mid Argyll, Kintyre and the Islands Area Committee from 18-05-22 to 18-07-22 5,595 - 5,595 - Councillor Liz McCabe Policy Lead for Islands and Business Development and Chair of Bute & Cowal Area Committee from 19-05- 22 27,554 - 27,554 26,313 Councillor Yvonne McNeilly Policy Lead for Education 28,648 - 28,648 - Councillor Ross Moreland Policy Lead for Climate Change and Environment Services from 19-05-22 24,932 - 24,932 19,611 Councillor Aileen Morton Chair of Helensburgh & Lomond Area Committee from 25-11-21 3,098 - 3,098 26,313 Councillor Gary Mulvaney Depute Leader and Policy Lead for Financial Services and Major Projects from 26-09-19 28,648 - 28,648 - Councillor Gemma Penfold Chair of Helensburgh & Lomond Area Committee from 19-05-22 22,675 - 22,675 21,873 Councillor Alasdair Redman Policy Lead for Business, Regeneration and Commercial Development from 22-10-20 to 20-08-21, Policy Lead for Economic Growth from 25-05-20 to 22- 10-20 14,692 - 14,692 21,938 Councillor Elaine Robertson Chair of Oban, Lorn & the Isles Area Committee 3,098 - 3,098 2022-23 Senior Councillors’ remuneration in the tables above does not include non-taxable expenses. The values in the table above relate to the actual payments made during 2022-23 which differ slightly from those stated on page 40 due to timing differences in regards to payroll.
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The Remuneration Report www.argyll-bute.gov.uk __________________________________________ Page 37 EMPLOYEES’ REMUNERATION The Regulations require that local authorities provide an analysis of the number of employees whose remuneration in the year was £50,000 or more, including those classified as senior employees who are subject to separate disclosure requirements. The definition of remuneration includes all sums paid to or receivable by an employee, expense allowances chargeable to tax and the monetary value of benefits received other than in cash. This definition therefore includes all payments made to the employee in respect of agreed employment terminations or retirements. However, employer pension contributions are excluded from the definition. Readers should be aware when making comparisons between years that, due to contractual incremental pay increases, the number of employees covered by this disclosure will increase each year. In addition, payments made in respect of agreed employment terminations or retirements can also distort the number and/or banding of employees. The number of employees whose remuneration, excluding employer pension contributions and including redundancy/retirement payments, was £50,000 or more in bands of £5,000 was: Total 330298 £115,000 - £119,999 -- £120,000 - £124,999 -- £135,000 - £139,999 1- £125,000 - £129,999 £130,000 - £135,000 - £105,000 - £109,999 -2 £110,000 - £114,999 2- 1 7 £95,000 - £99,999 11 £85,000 - £89,999 1- £90,000 - £94,999 11 9 Range 2022-232021-22 £ Number of OfficersNumber of Officers £50,000 - £54,999 136140 £60,000 - £64,999 6441 £55,000 - £59,999 8384 -- £65,000 - £69,999 1916 £75,000 - £79,999 31 £70,000 - £74,999 94 £100,000 - £104,999 1- £80,000 - £84,999
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The Remuneration Report www.argyll-bute.gov.uk __________________________________________ Page 38 SENIOR EMPLOYEES’ REMUNERATION The table below provides details of the remuneration paid to the Council’s senior employees. This is defined by the regulations as; someone who has responsibility for the management of the organisation, occupy a position which is politically restricted, or any additional employee whose annual remuneration is £150,000 or more (remuneration includes salary, non-cash benefits and any lump sum payment for loss of employment) The following table sets out the remuneration disclosures for 2022-23 for senior officers: Total Remuneration 2021-22 Post Holder Salary (Including Fees and Allowances) Taxable Expenses Total Remuneration 2022-23 £ £ £ £ 133,285 Chief Executive - Pippa Milne 138,387 490 138,877 107,730 Executive Director - Douglas Hendry 111,663 743 112,406 107,752 Executive Director, Section 95 Financial Officer - Kirsty Flanagan 111,518 642 112,160 40,600 Head of Children and Families and Criminal Justice (Section 3 Social Work Officer) - David Gibson (from 14- 09-21) 84,180 84,180 80,336 (Full year equivalent) - 80,501 Live Argyll General Manager (Subsidiary of Argyll & Bute Council) - Kevin Anderson 84,180 - 84,180
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The Remuneration Report www.argyll-bute.gov.uk __________________________________________ Page 39 PENSION BENEFITS Pension benefits for councillors and local government employees are provided through the Local Government Pension Scheme (LGPS). Councillors’ pension benefits are based on career average pay. A councillor’s pay for pension purposes for each year or part year ending 31 March (other than the pay in the final year commencing 1 April) is increased by the increase in the cost of living, as measured by the appropriate index (or indices) between the end of that year and the last day of the month in which their membership of the scheme ends. The total of the revalued pay is then divided by the period of membership to calculate the career average pay. This is the value used to calculate the pension benefits. Local government employees had a final salary pension scheme prior to 1 April 2015. This means that pension benefits are based on the final year’s pay and the number of years that person has been a member of the scheme. As of 1 April 2015, local government employees are now part of a defined benefit pension scheme worked out on a career average basis. Benefits accumulated are calculated using pensionable pay each scheme year, rather than final salary. All benefits accumulated prior to 1 April 2015 are protected. A five-tier contribution system is in place with contributions from scheme members based on how much pay falls into each tier. This is designed to give more equality between the costs and benefits of scheme membership. The tiers and members contribution rates for 2022-23 are as follows: Whole time pay Contribution Rate 2022-23 On earnings up to and including £22,300 5.50% On earnings above £22,301 and up to £27,300 7.25% On earnings above £27,301 and up to £37,400 8.50% On earnings above £37,401 and up to £49,900 9.50% On earnings above £49,901 12.00% From 1 April 2015, if a person works part-time their contribution is worked out on their part-time pay rate for the job. Prior to this, if a person worked part-time, their contribution rate was worked out on the whole- time pay rate for the job with actual contributions paid on actual pay earned. There is no automatic entitlement to a lump sum. Members may opt to give up (commute) pension for a lump sum up to the limit set by the Finance Act 2004. From 1 April 2015, benefits are calculated on the basis of a revalued annual pension built up of 1/49th of pensionable pay each year, plus inflation to keep up with the cost of living. Prior to this date, the accrual rate guaranteed a pension based on 1/60th of final pensionable salary and years of pensionable service. Prior to 2009 the accrual rate guaranteed a pension based on 1/80th and a lump sum based on 3/80th of final pensionable salary and years of pensionable service. The value of the accrued benefits has been calculated on the basis of the age at which the person will first become entitled to receive a full pension on retirement without reduction on account of its payment at that age; without exercising any option to commute pension entitlement into a lump sum; and without any adjustment for the effects of future inflation.
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The Remuneration Report www.argyll-bute.gov.uk __________________________________________ Page 40 SENIOR COUNCILLORS’ PENSION BENEFITS The pension entitlements for senior councillors for the year to 31 March 2023 are shown in the table below, together with the contribution made by the Council to each senior Councillor’s pension during the year. The pension benefits shown relate to the benefits that the individual has accrued as a consequence of their relevant local government service and not just their current appointment. In-year pension contribution s Accrued pension benefits Senior Members In-year pension contributions Accrued pension benefits £ £'000 £ £'000 5,078 7 Councillor Rory Colville Pension 717 11 2 Lump Sum 4 - - Councillor Garret Corner Pension 3,485 - - Lump Sum - - - Councillor Maurice Corry Pension 4,812 - - Lump Sum - 7,170 8 Councillor Robin Currie Pension 7,383 8 1 Lump Sum 1 4,234 2 Councillor Bobby Good Pension 598 2 - Lump Sum 5,078 3 Councillor Kieron Green Pension 5,529 4 - Lump Sum - - Councillor Amanda Hampsey Pension 4,812 - - Lump Sum - - - Councillor Andrew Kain Pension 4,812 - - Lump Sum - 5,377 7 Councillor David Kinniburgh Pension 759 6 2 Lump Sum 2 3,584 2 Councillor James Lynch Pension 4,376 2 - Lump Sum - - - Councillor John McAlpine Pension 1,080 - - Lump Sum - - - Councillor Liz McCabe Pension 5,318 1 - Lump Sum - 5,078 3 Councillor Yvonne McNeilly Pension 5,529 3 - Lump Sum - - Councillor Ross Moreland Pension 4,812 - - Lump Sum - 3,785 6 Councillor Aileen Morton Pension 598 6 - Lump Sum 5,078 6 Councillor Gary Mulvaney Pension 5,529 8 2 Lump Sum 2 3,557 - Councillor Gemma Penfold Pension 4,376 1 - Lump Sum - 4,221 2 Councillor Alasdair Redman Pension 2,836 2 Lump Sum For the year to 31 March 2022 For the year to 31 March 2023
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The Remuneration Report www.argyll-bute.gov.uk __________________________________________ Page 41 SENIOR EMPLOYEES’ PENSION BENEFITS The pension entitlements for senior employees for the year to 31 March 2023 are shown in the table below, together with the contribution made by the Council to each senior employee’s pension during the year. The pension benefits shown relate to the benefits that the individual has accrued as a consequence of their relevant local government service and not just their current appointment. In-year pension contribution s Accrued pension benefits Senior Officers In-year pension contributions Accrued pension benefits £ £'000 £ £'000 25,586 64 Pension 26,709 70 106 Lump Sum 111 20,546 61 Pension 21,495 66 107 Lump Sum 112 20,546 33 Pension 21,495 37 31 Lump Sum 32 8378 1 Head of Children and Families and Criminal Justice (Section 3 Social Work Officer) - David Gibson (from 14-09-21) Pension 16,247 8 Lump Sum - 15,537 31 Pension 16,247 33 38 Lump Sum 38 Live Argyll General Manager (Subsidiary of Argyll & Bute Council) - Kevin Anderson Chief Executive - Pippa Milne Executive Director of Customer Services - Douglas Hendry Executive Director, Section 95 Financial Officer - Kirsty Flanagan For the year to 31 March 2022 For the year to 31 March 2023
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The Remuneration Report www.argyll-bute.gov.uk __________________________________________ Page 42 EMPLOYEE EXIT PACKAGES The numbers of exit packages with cost per band for compulsory and other redundancies are set out in the table below: Exit Package Cost Band No £ No £ No £ No £ No £ No £ 2 11,782 1 11,144 3 22,926 £0 - £20,000 1 4,038 2 30,305 3 34,343 - - - - - - £20,001 - £40,000 1 38,924 2 55,403 3 94,327 - - - - - - £40,001 - £60,000 - - - - 1 70,992 1 70,992 £60,001 - £80,000 1 88,038 1 88,038 - - 1 80,629 1 80,629 £80,001 - £100,000 - - - - 1 133,113 1 133,113 £100,001 - £150,000 1 137,037 1 106,165 2 243,202 - - - - - - £150,001 - £200,000 1 161,869 1 161,869 2 11,782 4 295,878 6 307,660 4 341,868 6 279,911 10 621,779 2021-22 2022-23 Compulsory Redundancies Other Departures Total Compulsory Redundancies Other Departures Total For the purposes of this note, Exit Packages include: Redundancy payment; Strain on the fund cost (the amount which the Council is required to pay to the pension fund because the employee has retired before the assumed retirement age); Added Years Lump Sum (the amount which the Council pays to the individual in a one-off lump sum, according to the compensatory added years awarded – maximum three years); and A capitalised value of the recurring Compensatory Added Years payment. This represents the amount which the Council has to pay to the pension fund because the employee has retired with enhanced service (maximum three years). This amount is paid on an annual basis once a person has left employment with the Council and is therefore a notional cost at 31 March 2023. Termination costs for all Council employees who have accepted redundancy by 31 March 2023 are recognised in the Exit Packages note in 2022-23, or in previous financial years. The total cost recognised in the Exit Packages note in 2022-23 is £0.622m for 10 employees and in 2021-22 was £0.308m for 6 employees. The supplementary Termination Benefits Note 35 provides more information.
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The Remuneration Report www.argyll-bute.gov.uk __________________________________________ Page 43 FACILITY TIME STATEMENT Under the Trade Union (Facility Time Publication Requirements) Regulations 2017, the Council is required to collect and publish data in relation to its usage and spend of trade union facility time in respect of employees who are trade union representatives. Full details for the period 1 April 2022 to 31 March 2023 are attached at Appendix A.
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Statement of Comprehensive Income and Expenditure www.argyll-bute.gov.uk __________________________________________ Page 44 Gross Expenditure Gross Income Net Expenditure Gross Expenditure Gross Income Net Expenditure £'000 £'000 £'000 Service Note £'000 £'000 £'000 25,714 18,837 6,877 Chief Executive and Financial Services 26,810 18,209 8,601 Executive Director Douglas Hendry 389 389 Executive Director 436 - 436 21,022 3,498 17,524 Commercial Services 33,399 4,250 29,149 92,302 14,248 78,054 Education 106,026 13,620 92,406 11,769 4,228 7,541 Legal and Regulatory Support 10,857 (714) 11,571 Executive Director Kirsty Flanagan 337 337 Executive Director 418 - 418 11,374 708 10,666 Customer Support Services 11,859 674 11,185 23,172 11,634 11,538 Development and Economic Growth 25,256 14,380 10,876 70,602 22,504 48,098 Roads and Infrastructure 77,057 29,577 47,480 - - 158,106 88,788 69,318 Social Work 174,434 94,948 79,486 10,538 251 10,287 Other Non-Departmental Costs 9,832 2,291 7,541 425,325 164,696 260,629 Net Cost of Services 476,384 177,235 299,149 2021-22 2022-23
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Statement of Comprehensive Income and Expenditure www.argyll-bute.gov.uk __________________________________________ Page 45 Other Operating Income and Expenditure: (103) Net (Gain)/loss on Disposal of Long Term Assets (437) 1,836 Other Operating Income and Expenditure 8 1,643 1,733 Total Other Operating Income and Expenditure 1,206 Financing and Investment Income and Expenditure: 16,343 Interest Payable and Similar charges 10,514 (805) Interest and Investment Income (2,966) 1,864 Net Pension Interest Expense 141 17,402 Total Financing and Investment Income and Expenditure 7,689 Taxation and Non-Specific Grant Income: (191,432) General Government Grants (191,775) (21,700) Government Capital Grants and Other Capital Contributions 12 (22,549) (25,070) Non-domestic Rates Redistribution (33,179) (336) Non-domestic Rates TIF (647) (56,242) Council Tax Income (53,900) (294,780) Total Taxation and Non-Specific Grant Income (302,050) (15,016) (Surplus)/Deficit on Provision of Services 6.1 5,994 (26,631) (Surplus)/Deficit on revaluation of Long Term Assets (21,104) (110,648) Other Post Employment Benefits (Pensions) 30.2 (247,409) (137,279) Other Comprehensive Income and Expenditure (268,513) (152,295) Total Comprehensive Income and Expenditure (262,519) This statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. Councils raise taxation to cover expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in the Statement of Movement in Reserves.
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Balance Sheet www.argyll-bute.gov.uk __________________________________________ Page 46 £'000 £'000 Note £'000 £'000 Long Term Assets Property Plant & Equipment 15 414,852 - Other Land and Buildings 451,017 11,798 - Vehicles, Plant, Furniture and Equipment 10,872 230,478 - Infrastructure Assets 235,076 7,454 - Community Assets 8,892 1,408 - Surplus Assets 3,286 35,344 - Assets Under Construction 21,440 701,334 Total Property Plant & Equipment 730,583 2,099 Heritage Assets 16 2,345 604 Intangible Assets 17 733 2,428 Investment Property 18 2,553 492 Long Term Investments 27 5,492 5,792 Long-Term Debtors 22 5,880 4,634 Other Long Term Debtors (Pensions) 31 232,073 717,383 Total Long Term Assets 979,659 Current Assets 842 Inventories 1,130 18,263 Short Term Debtors (Net of Impairment) 23 34,080 1,509 Assets Held for Sale 24 1,554 82,500 Short Term Investments 60,000 19,728 Cash and Cash Equivalents 25 (6,082) 122,842 Total Current Assets 90,682 Current Liabilities (17,882) Short-term Borrowing 27 (11,818) (41,283) Short-term Creditors 26 (49,978) (2,231) Provisions 29 (1,450) (5,117) Other Short Term Liabilities 28 (5,280) (66,513) Total Current Liabilities (68,526) Long-term Liabilities (161,657) Borrowing Repayable within a Period in Excess of 12 Months 27 (132,155) (112,313) Other Long-term liabilities 28 (107,033) (2,079) Provisions 29 (2,444) - Other Long-term liabilities (Pensions) 30 - (276,049) Total Long-term Liabilities (241,632) 497,663 Total Assets less Liabilities 760,183 31 March 202331 March 2022
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Balance Sheet www.argyll-bute.gov.uk __________________________________________ Page 47 £'000 £'000 Note £'000 £'000 Unusable Reserves 32 157,645 - Revaluation Reserve 174,952 241,327 - Capital Adjustment Account 268,770 (2,198) - Financial Instruments Adjustment Account (1,871) 4,634 - Pensions Reserve 232,073 (6,928) - Accumulated Absences Account (7,588) 394,480 666,336 Usable Reserves 33 4,414 - Capital Funds 4,503 2,682 - Repairs and Renewals Funds 2,916 96,087 - General Fund Balance 86,428 103,183 93,847 497,663 Total Reserves 760,183 31 March 202331 March 2022 The Balance Sheet is a snapshot of the value as at the 31 March 2023 of the assets and liabilities recognised by the Council. The net assets of the Council (assets less liabilities) are matched by the reserves held by the Council. Reserves are reported as follows: • Unusable Reserves: are reserves that the Council is not able to use to provide services. This category of reserves includes reserves that hold unrealised gains and losses (for example the revaluation reserve), where amounts would only become available to provide services if the assets are sold and reserves that hold timing differences shown in the Movement in Reserves Statement line “Adjustments between accounting basis and funding basis under regulations”. • Usable Reserves: are reserves that the Council may use to provide services, subject to the need to maintain a prudent level of reserves and statutory limitations on their use (for example the capital receipts reserve that may only be used to fund capital expenditure or repay debt). Kirsty Flanagan Section 95 Officer
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Statement of Movement in Reserves www.argyll-bute.gov.uk __________________________________________ Page 48 Unusable Reserves (Note 32) Movements in 2022-23 General Fund Balance Repairs and Renewals Fund Capital Funds Total Usable Reserves Revaluation Reserve Capital Adjustment Account Pensions Reserve Financial Instrument Adjustment Account Accumu- lated Absences Account Total Unusable Reserves Total Reserves £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 March 2022 (96,081) (2,682) (4,414) (103,177) (157,644) (241,331) (4,634) 2,198 6,928 (394,483) (497,660) (Surplus)/Deficit on Provision of Services 5,994 5,994 - 5,994 Other Comprehensive Income and Expenditure (21,104) (247,409) (268,513) (268,513) Total Comprehensive Income and Expenditure 5,994 - - 5,994 (21,104) - (247,409) - - (268,513) (262,519) Adjustments between accounting basis and funding basis under regulations: Disposal of Assets 173 (173) Amortisation of Intangible Assets - - - - Depreciation of Non-current Assets (20,947) (20,947) 20,947 20,947 - Impairment of Non-current Assets (3,147) (3,147) 3,147 3,147 - Capital Grants and Contributions credited to the Comprehensive Income and Expenditure Statement 22,549 22,549 (22,549) (22,549) - Capital Expenditure Charged to the General Fund 2,938 2,938 (2,938) (2,938) - Net Gain or Loss on Sale of Non-current Assets 437 (568) (131) 131 131 - Amount by which finance costs calculated in accordance with the Code are different from the amount of finance costs calculated in accordance with statutory requirements 327 327 (327) (327) - Employee Benefits (660) (660) 660 660 - Amount by which pension costs calculated in accordance with the Code are different from the contributions due under pension scheme regulations (19,970) (19,970) 19,970 19,970 - Usable Reserves (Note 33)
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Statement of Movement in Reserves www.argyll-bute.gov.uk __________________________________________ Page 49 Unusable Reserves (Note 32) Movements in 2022-23 General Fund Balance Repairs and Renewals Fund Capital Funds Total Usable Reserves Revaluation Reserve Capital Adjustment Account Pensions Reserve Financial Instrument Adjustment Account Accumu- lated Absences Account Total Unusable Reserves Total Reserves £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Statutory Repayment of Debt - Loans Fund Advances 20,317 20,317 (20,317) (20,317) - Statutory Repayment of Debt - Finance Leases 46 46 (46) (46) - Statutory Repayment of Debt - NPDO Finance Lease Liability 5,070 5,070 (5,070) (5,070) - Total Statutory Adjustments 6,960 - (568) 6,392 173 (26,868) 19,970 (327) 660 (6,392) - Net (Increase)/Decrease before Transfers to Other Statutory Reserves 12,954 - (568) 12,386 (20,931) (26,868) (227,439) (327) 660 (274,905) (262,519) Transfer to/from Other Statutory Reserves 322 (234) 480 568 (568) (568) - Adjustments permitted by Accounting Standards for depreciation that is related to the revaluation balance rather than historic cost (3,623) (3,623) 3,623 3,623 - (Increase)/Decrease in Year 9,653 (234) (88) 9,331 (17,308) (27,436) (227,439) (327) 660 (271,850) (262,519) Balance at 31 March 2023 Carried Forward (86,428) (2,916) (4,503) (93,847) (174,952) (268,770) (232,073) 1,871 7,588 (666,336) (760,183) Other Transfers required by Statute Usable Reserves (Note 33) Other Transfers This Statement shows the movement in the 2022-23 financial year on the different reserves held by the Council, analysed into ‘Usable Reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and “Unusable Reserves”. The ‘(Surplus)/Deficit on the Provision of Services’ line shows the true economic cost of providing the Council’s services, more details of which are shown in Comprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the General Fund Balance for Council Tax setting purposes. The ‘Net (Increase)/Decrease before Transfers to Other Statutory Reserves’ line shows the Statutory General Fund Balance before any discretionary transfers to or from earmarked reserves undertaken by the Council.
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Statement of Movement in Reserves www.argyll-bute.gov.uk __________________________________________ Page 51 Unusable Reserves (Note 32) Comparative Movements in 2021-22 General Fund Balance Repairs and Renewals Fund Capital Funds Total Usable Reserves Revaluation Reserve Capital Adjustment Account Pensions Reserve Financial Instrument Adjustment Account Accumu- lated Absences Account Total Unusable Reserves Total Reserves £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 March 2021 (78,245) (2,134) (4,406) (84,785) (135,392) (217,237) 82,314 2,524 7,206 (260,585) (345,370) (Surplus)/Deficit on Provision of Services (15,016) (15,016) - (15,016) Other Comprehensive Expenditure and Income (26,631) (110,648) (137,279) (137,279) Total Comprehensive Expenditure and Income (15,016) - - (15,016) (26,631) - (110,648) - - (137,279) (152,295) Adjustments between accounting basis and funding basis under regulations: Disposal of Assets 632 (632) Amortisation of Intangible Assets (36) (36) 36 36 - Depreciation and of Non-current Assets (19,579) (19,579) 19,579 19,579 - Impairment of Non-current Assets 13,182 13,182 (13,182) (13,182) - Capital Grants and Contributions credited to the Comprehensive Income and Expenditure Statement 21,700 21,700 (21,700) (21,700) - Capital Expenditure Charged to the General Fund 735 735 (735) (735) - Net Gain or Loss on Sale of Non-current Assets 103 (815) (712) 712 712 - Amount by which finance costs calculated in accordance with the Code are different from the amount of finance costs calculated in accordance with statutory requirements 326 326 (326) (326) - Employee Benefits 278 278 (278) (278) - Amount by which pension costs calculated in accordance with the Code are different from the contributions due under pension scheme regulations (23,700) (23,700) 23,700 23,700 - Usable Reserves (Note 33)
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Statement of Movement in Reserves www.argyll-bute.gov.uk __________________________________________ Page 52 Unusable Reserves (Note 32) Comparative Movements in 2021-22 General Fund Balance Repairs and Renewals Fund Capital Funds Total Usable Reserves Revaluation Reserve Capital Adjustment Account Pensions Reserve Financial Instrument Adjustment Account Accumu- lated Absences Account Total Unusable Reserves Total Reserves £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Statutory Repayment of Debt - Loans Fund Advances 2,514 2,514 (2,514) (2,514) - Statutory Repayment of Debt - Finance Leases 44 44 (44) (44) - Statutory Repayment of Debt - NPDO Finance Lease Liability 4,800 4,800 (4,800) (4,800) - Total Statutory Adjustments 367 - (815) (448) 632 (23,280) 23,700 (326) (278) 448 - Net (Increase)/Decrease before Transfers to Other Statutory Reserves (14,649) - (815) (15,464) (25,999) (23,280) (86,948) (326) (278) (136,831) (152,295) Transfer to/from Other Statutory Reserves 553 (548) 807 812 (810) (810) 2 Adjustments permitted by Accounting Standards for depreciation that is related to the revaluation balance rather than historic cost (3,746) (3,746) 3,746 3,746 - (Increase)/Decrease in Year (17,842) (548) (8) (18,398) (22,253) (24,090) (86,948) (326) (278) (133,895) (152,293) Balance at 31 March 2022 Carried Forward (96,087) (2,682) (4,414) (103,183) (157,645) (241,327) (4,634) 2,198 6,928 (394,480) (497,663) Other Transfers required by Statute Usable Reserves (Note 33) Other Transfers This Statement shows the movement in the 2021-22 financial year on the different reserves held by the Council, analysed into ‘Usable Reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and “Unusable Reserves”. The ‘(Surplus)/Deficit on the Provision of Services’ line shows the true economic cost of providing the Council’s services, more details of which are shown in Comprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the General Fund Balance for Council Tax setting purposes. The ‘Net (Increase)/Decrease before Transfers to Other Statutory Reserves’ line shows the Statutory General Fund Balance before any discretionary transfers to or from earmarked reserves undertaken by the Council.
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Cash Flow Statement www.argyll-bute.gov.uk __________________________________________ Page 53 The Cash Flow Statement shows the changes in cash and cash equivalents of the Council during the reporting period. The statement shows how the Council generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amounts of net cash flow arising from operating activities is a key indicator of the extent to which the operations of the Council are funded by way of taxation and grant income or from the recipients of services provided by the Council. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Council’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Council. 2021-22 2022-23 £'000 Note £'000 (15,016) Net (Surplus) on the Provision of Services 5,994 (6,652) Adjustments to net surplus or deficit on the provision of services for non-cash movements (14,352) 7,928 Adjustments for items included in the net surplus or deficit on the provision of services that are investing and financing activities 5,955 (13,740) Net Cash Flows from Operating Activities 39 (2,403) 32,043 Net Cash Flows from Investing Activities 40 (14,323) (2,393) Net Cash Flows from Financing Activities 41 42,536 15,910 Net (Increase)/Decrease in Cash and Cash Equivalents 25,810 (35,638) Cash and Cash Equivalents at the beginning of the Reporting Period (19,728) (19,728) Cash and Cash Equivalents at the end of the Reporting Period 24 6,082
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 54 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1.1 General Principles The Annual Accounts summarise the Council’s transactions for the 2022-23 financial year and its position at the year-end of 31 March 2023. The Council must ensure that its Annual Accounts are prepared in accordance with The Local Authority Accounts (Scotland) Regulations 2014, which section 12 of the Local Government in Scotland Act 2003 require to be prepared in accordance with proper accounting practices. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2022-23, supported by International Financial Reporting Standards (IFRS) and statutory guidance issued under section 12 of the 2003 Act. The accounts have been prepared under the historic cost convention, other than changes resulting from the revaluation of certain categories of non-current assets and financial instruments, and on a going concern basis. 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: Revenue from contracts with service recipients, whether for services or the provision of goods, is recognised when (or as) the goods or services are transferred to the service recipient in accordance with the performance obligations in the contract. Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies are received and their consumption; they are carried as inventories on the Balance Sheet. Expenses in relation to services received (including services provided by employees) are recorded as expenditure when the services are received rather than when payments are made. Interest receivable on investments and payable on borrowings is accounted for respectively as income and expenditure on the basis of the effective interest rate for the relevant financial instrument rather than the cash flows fixed or determined by the contract. Where revenue and expenditure have been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Where debts may not be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected. 1.3 Cash and Cash Equivalents Cash is represented by cash in hand and deposits with financial institutions repayable without penalty of notice of not more than 24 hours. Cash equivalents are investments that mature in three months or less from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value. In the Balance Sheet and Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and form an integral part of the Council’s cash management. 1.4 Prior Period Adjustments, Changes in Accounting Policies, Estimates and Errors Prior period adjustments may arise as a result of a change in accounting policies or to correct a material error. Changes in accounting estimates are accounted for prospectively, i.e. in the current and future years affected by the change and do not give rise to a prior period adjustment. Changes in accounting policies are only made when required by proper accounting practices or the change provides more reliable or relevant information about the effect of transactions, other events and conditions on the Council’s financial position or financial performance. Where a change is made, it is applied retrospectively by adjusting opening balances and comparative amounts for the prior period as if the new policy had always been applied.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 55 Material errors discovered in prior period figures are corrected retrospectively by amending opening balances and comparative amounts for the prior period. 1.5 Charges to Revenue for Non-Current Assets Services, support services and trading accounts are debited with the following amounts to record the cost of holding non-current assets during the year: Depreciation attributable to the assets used by the relevant service. Revaluation and impairment losses on assets used by the service where there are no accumulated gains in the Revaluation Reserve against which the losses can be written off. Amortisation of intangible fixed assets attributable to the service. The council is not required to raise Council Tax to fund depreciation, revaluation and impairment losses or amortisation. However, it is required to make an annual contribution from revenue towards the reduction in its overall borrowing requirement equal to an amount calculated on a prudent basis determined by the Council in accordance with the Statutory Repayment of Loans Fund Advances. Depreciation, revaluation and impairment losses and amortisation are therefore replaced by Loans Fund principal repayments in the General Fund Balance by way of an adjusting transaction within the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two. 1.6 Employee Benefits 1.6.1 Benefits Payable during Employment Short-term employee benefits are those due to be settled wholly within 12 months of the year-end. They include such benefits as wages and salaries, paid annual leave, paid sick leave and non-monetary benefits (e.g. cars) for current employees. These benefits are recognised as an expense for services in the year in which employees render service to the Council. An accrual is made for the cost of holiday entitlements earned by employees but not taken before the year-end which employees can carry forward into the next financial year. The accrual is made at the wage and salary rates applicable in the following accounting year, being the period in which the employee takes the benefit. The accrual is charged to the Surplus or Deficit on the Provision of Services, but then reversed out through the Movement in Reserves Statement so that holiday entitlements are charged to revenue in the financial year in which the holiday absence occurs. 1.6.2 Termination Benefits Termination benefits are amounts payable as a result of a decision by the Council to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy. They are charged on an accruals basis to the appropriate service segment in the Comprehensive Income and Expenditure Statement at the earlier of when the Council can no longer withdraw the offer of those benefits or when the Council recognised costs for a restructuring. Where termination benefits involve the enhancement of pensions, statutory provisions require the General Fund Balance to be charged with the amount payable by the Council to the pension fund or pensioner in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, appropriations are required to and from the Pensions Reserve to remove the notional debits and credits for pension enhancement termination benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable but unpaid at the year-end.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 56 1.6.3 Post-Employment Benefits The Council participates in two separate pension schemes: The Scottish Teachers’ Pension Scheme administered by the Scottish Government. The Local Government (Scotland) Pensions Scheme administered by the Strathclyde Pension Fund. Both schemes provide defined benefits to members (retirement lump sums and pensions), earned while employees work for the Council. However, the arrangements for the teachers’ scheme mean that liabilities for these benefits cannot ordinarily be identified specifically to the Council. The scheme is therefore accounted for as if it were a defined contribution scheme. No liability for future payments of benefits is recognised in the Balance Sheet and the Education Services line in the Comprehensive Income and Expenditure Statement is charged with the employer’s contributions payable to the Teachers’ Pension Scheme in the year. Local Government Pension Scheme The Local Government Pension Scheme is accounted for as a defined benefits scheme: The liabilities of the Strathclyde Pension Fund attributable to the Council are included in the Balance Sheet on an actuarial basis using the projected unit method – i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates and projected earnings for current employees. Liabilities are discounted to their value at current prices, using a discount rate of 2.7% (based on the indicative rate of return on a “high quality corporate bond of equivalent term and currency to the liability” (as measured by the yield on iBoxx Sterling Corporates Index, AA over 15 years)). The assets of the Strathclyde Pension Fund attributable to the Council are included in the Balance Sheet at their fair value: quoted securities – current bid price unquoted securities – professional estimate unitised securities – current bid price property – market value The change in the net pension’s liability is analysed into the following components: Service cost comprising: Current service cost – the increase in liabilities as a result of years of service earned this year - allocated in the Comprehensive Income and Expenditure Statement to the services for which the employees worked. Past service cost – the increase in liabilities as a result of a scheme amendment or curtailment whose effect relates to years of service earned in earlier years, debited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement. Net interest on the net defined benefit liability (asset), i.e. net interest expense for the Council – the change during the period in the net defined benefit liability (asset) that arises from the passage of time charged to the Financing and Investment Income and Expenditure line of the Comprehensive Income and Expenditure Statement. This is calculated by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the net defined benefit liability (asset) at
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 57 the beginning of the period, taking into account any changes in the net defined liability (asset) during the period as a result of contribution and benefit payments. Re-measurements comprising: The return on plan assets – excluding amounts included in the net interest on the net defined benefit liability (asset), charged to the Pension Reserve as Other Comprehensive Income and Expenditure. Actuarial gains and losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuaries have updated their assumptions, charged to the Pensions Reserve. Contributions paid to the Strathclyde Pension Fund – cash paid as employer’s contributions to the pension fund in settlement of liabilities; not accounted for as an expense. In relation to retirement benefits, statutory provisions require the General Fund Balance to be charged with the amount payable by the Council to the pension fund or directly to pensioners in the year, not the amount calculated according to the relevant accounting standards. In the Movement in Reserves Statement, this means that there are transfers to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and pensioners and any such amounts payable to the fund but unpaid at the year-end. The negative balance that arises on the Pensions Reserve thereby measures the beneficial impact to the General Fund of being required to account for retirement benefits on the basis of cash flows rather than as benefits earned by employees. 1.6.4 Post Employment Discretionary Benefits The Council also has restricted powers to make discretionary awards of retirements benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff (including teachers) are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme. 1.7 Events after the Reporting Period 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. Events taking place after the date of authorisation for issue are not reflected in the Annual Accounts. 1.8 Financial Liabilities Financial liabilities are recognised on the Balance Sheet when the Council becomes party to the contractual provisions of a financial instrument and initially measured at fair value and carried at their amortised cost. Annual charges to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest payable are based on the carrying value of the liability, multiplied by the effective rate of interest for the instrument. The effective interest rate is the rate that exactly discounts estimated future cash payments over the life of the instrument to the amount at which it was originally recognised.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 58 For most of the borrowings that the Council has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable (plus accrued interest) and interest charged to the Comprehensive Income and Expenditure Statement is the amount payable for the year according to the loan agreement. Gains and losses on the repurchase or early settlement of borrowing are credited and debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement in the year of repurchase/settlement. However, where repurchase has taken place as part of the restructuring of the loan portfolio that involves the modification or exchange of existing instruments, the premium or discount is respectively deducted from or added to the amortised cost of the new or modified loan and the write-down to the Comprehensive Income and Expenditure Statement is spread over the life of the loan by an adjustment to the effective interest rate. Where premiums and discounts have been charged to the Comprehensive Income and Expenditure Statement, regulations allow the impact on the General Fund Balance to be spread over future years. The Council has a policy of spreading the gain/loss over the term that was remaining on the loan against which the premium was payable or discount receivable when it was repaid. The reconciliation of amounts charged to the Comprehensive Income and Expenditure Statement to the net charge required against the General Fund Balance is managed by a transfer to or from the Financial Instruments Adjustment Account in the Movement in Reserves Statement. 1.9 Financial Assets Financial assets are classified based on a classification and measurement approach that reflects the business model for holding the financial assets and their cashflow characteristics. There are three main classes of financial assets measured at: Amortised cost Fair value through profit or loss, and Fair value through other comprehensive income The Council’s business model is to hold investments to collect contractual cash flows. Financial assets are therefore classified as amortised cost, except for those whose contractual payments are not solely payment of principal and interest (i.e. where the cash flows do not take the form of a basic debt instrument). Financial Assets Measured at Amortised Cost Financial assets measured at amortised cost are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured at fair value. They are subsequently measured at their amortised cost. Annual credits to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For most of the financial assets held by the Council, this means that the amount presented in the Balance Sheet is the outstanding principal receivable (plus accrued interest) and interest credited to the Comprehensive Income and Expenditure Statement is the amount receivable for the year in the loan agreement. Financial Assets Measured at Fair Value through Profit or Loss Financial assets that are measured at fair value through profit or loss are recognised on the Balance Sheet when the Council becomes a party to the contractual provisions of a financial instrument and are initially measured and carried at fair value. Fair value gains and losses are recognised as they arrive in the Surplus or Deficit on the Provision of Services. The fair value measurements of the financial assets are based on the following techniques: Instruments with quoted market prices – the market price
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 59 Other instruments with fixed and determinable payments – discounted cash flow analysis The inputs to the measurement techniques are categorised in accordance with the following three levels: Level 1 inputs – quoted prices (unadjusted) in active markets for the identical assets that the Council can access at the measurement date. Level 2 inputs – inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly. Level 3 inputs – unobservable inputs for the asset. Any gains and losses that arise on the derecognition of the asset are credited or debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. Expected Credit Loss Model The Council recognises expected credit losses on all of its financial assets held at amortised cost, either on a 12-month or lifetime basis. The expected credit loss model also applies to lease receivables and contract assets. Only lifetime losses are recognised for trade receivables (debtors) held by the Council. 1.10 Government Grants and Contributions Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations are recognised as due to the Council when there is reasonable assurance that: The Council will comply with the conditions attached to the payments; and The grants or contributions will be received. Amounts recognised as due to the Council are not credited to the Comprehensive Income and Expenditure Statement until conditions attached to the grant or contribution have been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset in the form of the grant or contribution are required to be consumed by the recipient as specified, or future economic benefits or service potential must be returned to the transferor. Monies advanced as grants and contributions for which conditions have been satisfied are carried in the Balance Sheet as creditors. When conditions are satisfied, the grant or contribution is credited to the relevant service line (attributable revenue grants and contributions) or Taxation and Non-Specific Grant Income and Expenditure (non-ringfenced revenue grants and all capital grants) in the Comprehensive Income and Expenditure Statement. Where capital grants are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance in the Movement in Reserves Statement. Where the grant has yet to be used to finance capital expenditure, it is posted to the Capital Grants Unapplied Account. Where it has been applied, it is posted to the Capital Adjustment Account. Amounts in the Capital Grants Unapplied Account are transferred to the Capital Adjustment Account once they have been applied to fund capital expenditure. 1.11 Heritage Assets The main heritage assets held by the Council are two art collections, an archaeology collection and a historic jail and courthouse which is operated as a “living” museum. The “Argyll Collection” is an art collection which was set up to provide the young people of Argyll and Bute with direct access to a wide range of quality art recognising that they had limited access to museums and galleries. In addition, the Council holds other works of art which are held at various libraries and the Campbeltown Museum. Heritage Assets are recognised and measured (including the treatment of revaluation gains and losses) in accordance with the Council’s accounting policies on property, plant and equipment. However, some of the measurement rules are relaxed in relation to heritage assets as detailed below. The Council’s main heritage assets are accounted for as follows:
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 60 The Art Collections The collections cover a range of media including acrylic, charcoal, embroidery, engraving, etching, gouache, lithography, oil, pastel, pencil, procion dye, screenprint, monoprint, watercolour, woodcut, ceramic, bronze and woodcarving. These items are reported in the Balance Sheet at insurance valuation which is based on market values. These valuations are updated periodically. The assets within the art collections are deemed to have indeterminate lives and a high residual value; hence the Council does not consider it appropriate to charge depreciation. Acquisitions are made by purchase or donation. Acquisitions are initially recognised at cost and donations are recognised at valuation with valuations provided by external valuers and with reference to appropriate commercial markets using the most relevant and recent information from sales at auctions. Inveraray Jail and Courthouse and “Other” Historic Buildings The building is owned by Argyll and Bute Council and leased out to an organisation which runs it as a “living museum”. The building is valued in accordance with the Council’s property, plant and equipment policy. Other buildings included in this category are McCaig’s Folly in Oban, the Argyll Mausoleum and Castle Lodge in Dunoon. Archaeology and “Other” Museum Exhibits The Council has obtained specialist valuations for the archaeology collection held within Campbeltown Museum which covers a range of objects including swords, bones, pottery, stone and leather remains. Similar to the Art Collections, these items are reported in the Balance Sheet at insurance valuation which is based on market values. These valuations will be updated periodically. The assets within the collection are deemed to have indeterminate lives and a high residual value; hence the Council does not consider it appropriate to charge depreciation. Heritage Assets – General The carrying amounts of heritage assets are reviewed where there is evidence of impairment for heritage assets, e.g. where an item has suffered physical deterioration or breakage or where doubts arise as to its authenticity. Any impairment is recognised and measured in accordance with the Council’s general policies on impairment (see note 1.19.3 in this summary of significant accounting policies). The proceeds of any disposals are accounted for in accordance with the Council’s general provisions relating to the disposal of property, plant and equipment. Disposal proceeds are disclosed separately in the notes to the financial statements and are accounted for in accordance with statutory accounting requirements relating to capital expenditure and receipts (see note 1.19.4 in this summary of significant accounting policies). 1.12 Intangible Assets Expenditure on non-monetary assets that do not have physical substance but are controlled by the Council as a result of past events (e.g. software licences) is capitalised when it is expected that future economic benefits or service potential will flow from the intangible asset to the Council. Expenditure on the development of websites is not capitalised if the website is solely or primarily intended to promote or advertise the Council’s goods or services. Intangible assets are measured initially at cost. Amounts are not revalued, as the fair value of the assets held by the Council cannot be determined by reference to an active market. The depreciable amount of an intangible asset is amortised over its useful life to the relevant service lines in the Comprehensive Income and Expenditure Statement. An asset is tested for impairment whenever there is an indication that the asset might be impaired – any losses recognised are posted to the relevant service lines in the Comprehensive Income and Expenditure Statement. Any gain or loss arising on the disposal or abandonment of an intangible asset is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 61 Where expenditure on intangible assets qualifies as capital expenditure for statutory purposes, amortisation, impairment losses and disposal gains and losses are not permitted to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account. 1.13 Interests in Companies and Other Entities The Council has material interests in companies and other entities that have the nature of subsidiaries, associates or joint ventures and requires to prepare Group Accounts. In the Council’s own single entity accounts, the interests in companies and other entities are recorded as financial assets at cost, less any provision for losses. 1.14 Inventories Inventories are included in the Balance Sheet at the lower of cost and net realisable value. The cost of inventories is assigned using the weighted average costing formula. 1.15 Investment Properties Investment properties are those that are used solely to earn rentals and/or for capital appreciation. The definition is not met if the property is used in any way to facilitate the delivery of services or production of goods or is held for sale. Investment properties are measured initially at cost and subsequently at fair value, being the price that would be received to sell such an asset in an orderly transaction between market participants at the measurement date. As a non-financial asset, investment properties are measured at highest and best use. Properties are not depreciated but are revalued annually according to market conditions at the year-end. Gains and losses on revaluation are posted to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. The same treatment is applied to gains and losses on disposal. Rentals received in relation to investment properties are credited to the Financing and Investment Income line and result in a gain for the General Fund Balance. However, revaluation and disposal gains and losses are not permitted by statutory arrangements to have an impact on the General Fund Balance. The gains and losses are therefore reversed out of the General Fund Balance in the Movement in Reserves Statement and posted to the Capital Adjustment Account. 1.16 Leases Leases are classified as finance leases where the terms of the lease transfer substantially all the risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. All other leases are classified as operating leases. Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification. Arrangements that do not have the legal status of a lease but convey a right to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependent on the use of specific assets. 1.16.1 The Council as Lessee a) Finance Leases Property, plant and equipment held under finance leases is recognised on the Balance Sheet at the commencement of the lease at its fair value measured at the lease’s inception (or the present value of the minimum lease payments, if lower). The asset recognised is matched by a liability for the obligation to pay the lessor. Initial direct costs of the Council are added to the carrying amount of the asset. Premiums paid on entry into a lease are applied to writing down the lease liability.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 62 Lease payments are apportioned between: A charge for the acquisition of the interest in the property, plant or equipment – applied to write down the lease liability, and A finance charge (debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement). Property, plant and equipment recognised under finance leases is accounted for using the policies applied generally to such assets, subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life. The Council is not required to raise Council Tax to cover depreciation or revaluation and impairment losses arising on leased assets. Instead, a prudent annual contribution is made from revenue funds towards the deemed capital investment in accordance with statutory requirements. Depreciation and revaluation and impairment losses are therefore substituted by a revenue contribution in the General Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two. b) Operating Leases Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense of the services benefiting from use of the leased property, plant or equipment. Charges are made on a straight-line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a rent-free period at the commencement of the lease). 1.16.2 The Council as Lessor a) Finance Leases Where the Council grants a finance lease over a property or an item of plant and equipment, the relevant asset is written out of the Balance Sheet as a disposal. At the commencement of the lease, the carrying amount of the asset in the Balance Sheet (whether property, plant and equipment or assets held for sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. A gain, representing the Council’s net investment in the lease, is credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal), matched by a lease (long-term debtor) asset in the Balance Sheet. Lease rentals receivable are apportioned between: A charge for the acquisition of the interest in the property – applied to write down the lease debtor (together with any premiums received); and Finance income (credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement). The gain credited to the Comprehensive Income and Expenditure Statement on disposal is not permitted by statute to increase the General Fund Balance and is required to be treated as a capital receipt. Where a premium has been received, this is posted out of the General Fund Balance to the Capital Receipts Reserve in the Movement in Reserves Statement. When the future rentals are received, the element for the capital receipt on disposal of the asset is used to write down the debtor. At this point, the deferred capital receipts are transferred to the Capital Receipts Reserve. The written-off value of disposals is not a charge against Council Tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 63 b) Operating Leases Where the Council grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the relevant Service lines in the Comprehensive Income and Expenditure Statement, with the exception of rental income from investment property which is credited to Interest and Investment Income. Credits are made on a straight line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a premium paid at the commencement of the lease). Initial direct costs incurred in negotiating and arranging the lease are added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income. 1.17 Overheads and Support Services The costs of overheads and support services are not charged to service segments in accordance with the Council’s arrangements for accountability and financial performance. 1.18 Assets Held for Sale Property, plant and equipment are classified as Assets Held for Sale when the following criteria are met: The property is available for immediate sale in its present condition. The sale must be highly probable; and an active programme to locate a buyer and complete the plan must have been initiated. The asset must be actively marketed for sale at a price that is reasonable in relation to its current fair value. The sale should be expected to qualify for recognition as a completed sale within one year (although events or circumstances may extend the period to complete the sale beyond one year). When these criteria are met, assets within the category of Property, Plant and Equipment will be reclassified as Assets Held for Sale. 1.19 Property, Plant and Equipment Assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes that are expected to be used during more than one financial year are classified as Property, Plant and Equipment. 1.19.1 Recognition Expenditure on the acquisition, creation, or enhancement of Property, Plant and Equipment is capitalised on an accruals basis, provided that it is probable that the future economic benefits or service potential associated with the item will flow to the Council and the cost of the item can be measured reliably. Expenditure that maintains but does not add to an asset’s potential to deliver future economic benefits or service potential (i.e. repairs and maintenance) is charged as an expense when it is incurred. 1.19.2 Measurement Assets are initially measured at cost, comprising: The purchase price. Any costs attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. The Council does not capitalise borrowing costs incurred while assets are under construction.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 64 The cost of assets acquired other than by purchase is deemed to be its fair value, unless the acquisition will not increase the cash flows of the Council. In the latter case, the cost of the acquisition is the carrying amount of the asset given up by the Council. Donated assets are measured initially at fair value. The difference between fair value and any consideration paid is credited to the Taxation and Non-Specific Grant Income line of the Comprehensive Income and Expenditure Statement, unless the donation has been made conditionally. Until conditions are satisfied, the gain is held in the Donated Assets Accounts. Where gains are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance to the Capital Adjustment Account in the Movement in Reserves Statement. Assets are then carried in the Balance Sheet using the following measurement bases: Infrastructure, community assets and assets under construction – depreciated historical cost. Council offices – current value, determined as the amount that would be paid for the asset in its existing use (existing use value – EUV). School buildings – current value, but because of their specialist nature, are measured at depreciated replacement cost which is used as an estimate of current value. Surplus assets – the current value measurement base is fair value, estimated at highest and best use from a market participant’s perspective. All other assets – current value, determined as the amount that would be paid for the asset in its existing use (existing use value – EUV). Where there is no market-based evidence of current value because of the specialist nature of an asset, depreciated replacement cost (DRC) is used as an estimate of current value. Where non-property assets have short useful lives or low values (or both), depreciated historical cost is used as a proxy for current value. Assets included in the Balance Sheet at current value are revalued sufficiently regularly to ensure that their carrying amount is not materially different from their current value at the year-end, but as a minimum every five years. Increases in valuations are matched by credits to the Revaluation Reserve to recognise unrealised gains. Exceptionally, gains might be credited to the Surplus or Deficit on the Provision of Services where they arise from the reversal of an impairment loss previously charged to a service. Where decreases in value are identified, they are accounted for by: Where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains). Where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service line(s) in the Comprehensive Income and Expenditure Statement. The Revaluation Reserve contains revaluation gains recognised since 1 April 2007, the date of its formal implementation. Gains arising before that date have been consolidated into the Capital Adjustment Account. 1.19.3 Impairment Assets are assessed at each year-end as to whether there is any indication that an asset may be impaired. Where indications exist and any possible differences are estimated to be material, the recoverable amount of the asset is estimated and, where this is less than the carrying amount of the asset, an impairment loss is recognised for the shortfall. Where impairment losses are identified, they are accounted for by:
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 65 Where there is a balance of revaluation gains for the asset in the Revaluation Reserve, the carrying amount of the asset is written down against that balance (up to the amount of the accumulated gains) Where there is no balance in the Revaluation Reserve or an insufficient balance, the carrying amount of the asset is written down against the relevant service lines in the Comprehensive Income and Expenditure Statement. Where an impairment loss is reversed subsequently, the reversal is credited to the relevant service lines in the Comprehensive Income and Expenditure Statement, up to the amount of the original loss, adjusted for depreciation that would have been charged if the loss had not been recognised. 1.19.4 Disposals and Non-current Assets Held for Sale When it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction rather than through its continuing use, it is reclassified as an Asset Held for Sale. The asset is re-valued immediately before reclassification and then carried at the lower of this amount and fair value less costs to sell. Where there is a subsequent decrease to fair value less costs to sell, the loss is posted to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Gains in fair value are recognised only up to the amount of any previous losses recognised in the Surplus or Deficit on the Provision of Services. Depreciation is not charged on Assets Held for Sale. Assets that are to be abandoned or scrapped are not reclassified as Assets Held for Sale. When an asset is disposed of or decommissioned, the carrying amount of the asset in the Balance Sheet (whether Property, Plant and Equipment or Assets Held for Sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of disposal). Any revaluation gains accumulated for the asset in the Revaluation Reserve are transferred to the Capital Adjustment Account. Disposal receipts are categorised as capital receipts. All capital receipts are credited to the Capital Receipts Reserve, and can then only be used for new capital investment. Receipts are appropriated to the Reserve from the General Fund Balance in the Movement in Reserves Statement. The written-off value of disposals is not a charge against Council Tax, as the cost of non-current assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement. 1.19.5 Depreciation Depreciation is provided for on all Property, Plant and Equipment assets by the systematic allocation of their depreciable amounts over their useful lives. An exception is made for assets without a determinable finite useful life (i.e. land and certain community assets) and assets that are not yet available for use (i.e. assets under construction). Where an asset has major components whose cost is significant in relation to the total cost of the item, the components are depreciated separately. Revaluation gains are also depreciated, with an amount equal to the difference between current value depreciation charged on assets and the depreciation that would have been chargeable based on their historical cost being transferred each year from the Revaluation Reserve to the Capital Adjustment Account. 1.20 Private Finance Initiative (PFI) and Similar Contracts PFI contracts are agreements to receive services, where the responsibility for making available the property, plant and equipment needed to provide the services passes to the PFI contractor. As the Council is deemed to control the services that are provided under its PFI schemes and as ownership of
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 66 the property, plant and equipment will pass to the Council at the end of the contracts for no additional charge, the Council carries the assets used under the contracts on the Balance Sheet. The original recognition of these assets at fair value was balanced by the recognition of a liability for amounts due to the scheme operator to pay for the capital investment. Non-current assets recognised on the Balance Sheet are revalued and depreciated in the same way as Property, Plant and Equipment owned by the Council. The amounts payable to the PFI operators each year are analysed into five elements: Fair value of the services received during the year - debited to the relevant service in the Comprehensive Income and Expenditure Statement. Finance Cost – this is calculated by applying the implicit interest rate in the lease to the opening lease liability for the period, this is debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. Contingent rent – increases in the amount to be paid for the property arising during the contract, debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. Payment towards liability – applied to write down the Balance Sheet liability towards the PFI operator (the profile of write-downs is calculated using the same principles as for a finance lease). Lifecycle replacement costs – proportion of the amounts payable is posted to the Balance Sheet as a prepayment and then recognised as additions to Property, Plant and Equipment when the relevant works are eventually carried out. 1.21 Provisions and Contingent Liabilities 1.21.1 Provisions Provisions are made where an event has taken place that gives the Council a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential, and a reliable estimate can be made of the amount of the obligation. For instance, the Council may be involved in a court case that could eventually result in a settlement or the payment of compensation. Provisions are charged as an expense to the appropriate service line in the Comprehensive Income and Expenditure Statement in the year that the Council becomes aware of the obligation, and measured at the best estimate at the Balance Sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision set up in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year and where it becomes more likely than not that a transfer of economic benefits will not now be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service. Where some or all of the payment required to settle a provision is expected to be recovered from another party (e.g. from an insurance claim), this is only recognised as income for the relevant service if it is virtually certain that reimbursement will be received if the obligation is settled. 1.21.2 Contingent Liabilities A contingent liability arises where an event has taken place that gives the Council a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the Council. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably. Contingent liabilities are not recognised in the Balance Sheet but disclosed in a note to the accounts.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 67 1.22 Reserves Reserves are created by appropriating amounts out of the General Fund Balance in the Movement in Reserves Statement. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service in that year to score against the Surplus/Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement. The reserve is then appropriated back into the General Fund Balance in the Movement in Reserves Statement so that there is no net charge against Council Tax for the expenditure. Certain reserves are kept to manage the accounting processes for non-current assets, financial instruments and retirement benefits and do not represent usable resources for the Council – these reserves are explained in the relevant policies above and Note 32 to the accounts. 1.23 VAT Income and expenditure excludes any amounts related to VAT, as all VAT collected is payable to HM Revenue and Customs and VAT paid is recoverable. 2. ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED The standards introduced by the 2023-24 Code where disclosures are required in the 2022-23 financial statements in accordance with the requirements of paragraph 3.3.4.3 of the code are: Annual Improvements to IFRS Standards 2018-2020. IAS 16 - Property Plant & Equipment: amendments - Proceeds before intended Use IAS 8 – Definition of Accounting Estimates IAS 1 and IFRS Practice Statement 2 – Disclosure of Accounting Policies IAS 12 – Deferred Tax related to Assets and Liabilities arising from a Single Transaction IFRS 3 – Updating reference to Conceptual Framework There will be no material impact in future years from the adoption of these amendments. CIPFA/LASAAC has agreed to defer the implementation of IFRS 16 Leases until 1 April 2024. 3. CRITICAL JUDGEMENTS IN APPLYING ACCOUNTING POLICIES In applying the accounting policies set out in Note 1, the Council has had to make certain judgements about complex transactions or those involving uncertainty about future events. Where a critical judgement has been made this is referred to in the relevant note to the core financial statements; however a summary of those with the most significant effect is detailed below: There is a high degree of uncertainty about future levels of funding for local government. However, the Council has determined that this uncertainty is not yet sufficient to provide an indication that the assets of the Council might be impaired as a result of a need to close facilities and reduce levels of service provision.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 68 The Council currently operates three Private Finance Initiative (PFI), or similar, contracts which are accounted for as Service Concession arrangements under IFRIC12 – Service Concession Arrangements. The Council has determined that in the case of the Schools NPDO contract and the new Schools DBFM contract, the Council has control over the services provided through use of the schools and that a qualifying asset has been created. The appropriate accounting treatment is to bring the assets “on Balance Sheet” along with a finance lease liability. The Council also operates a Waste Management PPP contract. In this case the Council determined that a “qualifying asset” had not been created and that the Council did not have significant control over the services being provided. The appropriate accounting treatment was therefore determined to be “off Balance Sheet” and that payments to the contractor are charged to the appropriate service line within the Comprehensive Income and Expenditure Account. The Council has considered its exposure to possible losses and made adequate provision where it is probable that an outflow of resources will be required and the amount of the obligation can be measured reliably. Where it has not been possible to measure the obligation, material contingent liabilities have been disclosed in Note 34. Unused holiday entitlement earned at 31 March 2023 but not taken at that date has been quantified on the basis of a 5% sample of all non-term time Council employees. The calculation in respect of unused holidays for term time staff in schools is based on actual leave entitlement as at 31 March and no estimation is required for these staff. The liability shown in the 2022-23 financial statements in respect of the holiday pay accrual is £7.588m. 4. ASSUMPTIONS MADE ABOUT THE FUTURE AND OTHER MAJOR SOURCES OF ESTIMATION UNCERTAINTY The financial statements contain estimated figures that are based on assumptions made by the Council about which there is a degree of uncertainty. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. The items in the Council’s Balance Sheet at 31 March 2023 for which there is a significant risk of material adjustment in the forthcoming financial year are outlined in the table that follows:
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 69 Item Uncertainties Effect if Actual Results Differ from Assumptions Property, Plant and Equipment Assets are depreciated over useful lives that are dependent on assumptions about the level of repairs and maintenance that will be incurred in relation to individual assets. The current economic climate makes it uncertain that the Council will be able to sustain its current spending on repairs and maintenance, bringing into doubt the useful lives. If the useful life of assets is reduced, depreciation increases and the carrying amount of the assets falls. It is estimated that the annual depreciation charge for buildings would increase by £0.881m for every year that useful lives had to be reduced. Rolling Programme Valuation The Council employs professional valuers who are registered with the Royal Institution of Chartered Surveyors. These valuers carry out regular reviews of the assets reported in the Balance Sheet and any significant changes in value are processed as an asset revaluation or impairment. These valuations are based on their professional opinion using available market information at the time of assessment. Due to the high number of assets, a rolling program of asset valuations has been established for many years, with the aim of revaluing one fifth of the portfolio each financial year which is made up of various asset types. This is in addition to those assets which are valued annually; Surplus Assets, Investment Properties, Held for sale assets and those where capital spend has exceeded £0.1m in the current year. This carries inherent risk that assets not revalued in-year have been subject to material changes in value particularly if affected by external factors such as inflation. The highest risk in this respect relates to assets valued using the depreciated Replacement Cost (DRC) method, which for Argyll & Bute Council includes schools. To mitigate this risk, a desktop assessment was undertaken for 2022-23 to estimate the potential increase in value of our assets valued using depreciated replacement cost using BCIS indices. An adjustment was made to the accounts of £25.062m to reflect this assessment. Consideration is given on an annual basis to those assets which may have material impairment.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 70 Pensions Liability Estimation of the net liability to pay pensions depends on a number of complex judgements relating to the discount rate used, the rate at which salaries are projected to increase, changes in retirement ages, mortality rates and expected returns on pension fund assets. A firm of consulting actuaries is engaged to provide the Council with expert advice about the assumptions to be applied. The effects on the net pension’s liability of changes in individual assumptions can be measured. The sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out as follows: Sensitivities at 31 March 2023 Approximate % Increase to Employer Liability Approximate monetary amount £’000 0.1% decrease in real discount rate 2% 10,974 1 Year increase in the member life expectancy 4% 24,915 0.1% increase in salary increase rate 0% 1,044 0.1% increase in pension increase rate 2% 10,091
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 71 5.1 EXPENDITURE AND FUNDING ANALYSIS Net Expenditure Chargeable to the General Fund Adjustments between the Funding and Accounting Basis (Note 31) Net Expenditure in the Comprehensive Income and Expenditure Statement Net Expenditure Chargeable to the General Fund Adjustments between the Funding and Accounting Basis (Note 31) Net Expenditure in the Comprehensive Income and Expenditure Statement £'000 £'000 £'000 Service £'000 £'000 £'000 5,790 1,087 6,877 Chief Executive and Financial Services 7,547 1,054 8,601 Executive Director Douglas Hendry 330 59 389 Executive Director 365 71 436 9,471 8,053 17,524 Commercial Services 15,408 13,741 29,149 86,427 (8,373) 78,054 Education 87,176 5,230 92,406 9,466 (1,925) 7,541 Legal and Regulatory Support 12,651 (1,080) 11,571 Executive Director Kirsty Flanagan 305 32 337 Executive Director 368 50 418 7,553 3,113 10,666 Customer Support 8,487 2,698 11,185 9,752 1,786 11,538 Development and Economic Growth 8,964 1,912 10,876 30,914 17,187 48,098 Roads and Infrastructure 33,249 14,234 47,480 67,080 2,238 69,318 Social Work 73,537 5,949 79,486 10,974 (687) 10,287 Other Non-Departmental Costs 8,149 (608) 7,541 238,062 22,570 260,629 Net Cost of Services 255,901 43,251 299,149 2021-22 2022-23
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 72 (255,904) (19,741) (275,645) Other Income and Expenditure (246,248) (46,909) (293,155) (17,842) 2,829 (15,016) (Surplus) / Deficit 9,653 (3,658) 5,994 (78,245) Opening General fund Balance (96,081) (17,842) Plus (Surplus) or Deficit on General Fund Balance 9,653 (96,087) Closing General Fund Balance (86,428) The Expenditure and Funding Analysis shows how annual expenditure is used and funded from resources (government grants, council tax and business rates) by local authorities in comparison with those resources consumed or earned by authorities in accordance with generally accepted accounting practices. It also shows how this expenditure is allocated for decision making purposes between the council’s services. Income and expenditure accounted for under generally accepted accounting practices is presented more fully in the Comprehensive Income and Expenditure Statement.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 73 5.2 EXPENDITURE AND FUNDING ANALYSIS RECONCILIATION This note provides a reconciliation of the main adjustments to Net Expenditure Chargeable to the General Fund to arrive at the amounts in the Comprehensive Income and Expenditure Statement. Adjustments for Capital Purposes Note (i) Net change for Pension Adjustments Note (ii) Capital element of Schools NPDO payment Note (iii) Other Adjustments Note (iv) Total Adjustments £'000 £'000 £'000 £'000 £'000 Chief Executive and Strategic Finance 1,047 7 1,054 Executive Director (Douglas Hendry) Executive Director (Douglas Hendry) 71 - 71 Commercial Services 11,869 1,866 - 6 13,741 Education 318 4,514 398 5,230 Legal and Regulatory Support 3,194 796 (5,071) - (1,081) Executive Director (Kirsty Flanagan) Executive Director (Kirsty Flanagan) 50 - 50 Head of Customer Support 1,402 1,296 - 2,698 Head of Development and Economic Growth 345 1,535 32 1,912 Roads and Infrastructure 10,479 3,666 89 14,234 Social Work 226 5,623 101 5,950 Other Non-Departmental Costs - (635) 27 (608) - - 27,833 19,829 (5,071) 660 43,251 Other Income and Expenditure (46,355) 141 - (695) (46,909) (18,522) 19,970 (5,071) (35) (3,658) Net Cost of Services Difference between General Fund Surplus and Comprehensive Income and Expenditure Statement (Surplus)/Deficit Adjustments from General Fund to arrive at the Comprehensive Income and Expenditure Statement amounts Adjustments between Funding and Accounting Basis 2022-23
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 74 (i) Adjustments for Capital Purposes This column adds in depreciation and impairment and revaluation gains and losses in the services line, and for: Other operating expenditure – adjusts for capital disposals with a transfer of income on disposal of assets and the amounts written off for those assets. Taxation and non-specific grant income and expenditure – capital grants are adjusted for income not chargeable under generally accepted accounting practices. Revenue grants are adjusted from those receivable in the year to those receivable without conditions or for which conditions were satisfied throughout the year. The Taxation and Non Specific Grant Income and Expenditure line is credited with capital grants receivable in the year without conditions or for which conditions were satisfied in the year. Financing and investment income and expenditure – the statutory charges for capital financing (loans fund advances) and other revenue contributions are deducted from other income and expenditure as these are not chargeable under generally accepted accounting practices. (ii) Net change for the Pensions Adjustments Net change for the removal of pension contributions and the addition of IAS 19 Employee Benefits pension related expenditure and income: For services this represents the removal of the employer pension contributions made by the Council as allowed by statute and the replacement with current service costs and past service costs. For Financing and investment income and expenditure – the net interest on the defined benefit liability is charged to the Comprehensive Income and Expenditure Statement. (iii) Capital element of schools NPDO payment This is the capital cost of the annual payment to the schools NPDO operator and represents repayment of the Balance Sheet liability rather than a charge to Comprehensive Income and Expenditure Statement. (iv) Other Adjustments For Financing and investment income and expenditure the other differences column recognises adjustments to the General Fund for the timing differences for premiums and discounts. For services an adjustment is made for the accrual of holiday pay and other similar entitlements, this is required under generally accepted accounting principles but the impact on the General Fund is mitigated by statute which allows the impact to be reversed out through the Movement in Reserves Statement.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 75 6 GENERAL FUND RESERVES The Council has ring-fenced £79.466m of the balance on the General Fund. Ring-fenced Balances Balance 1 April 2022 Funds Used Contributions to/from Funds New Earmarking agreed 2022-23 New Earmarking at end of 2022-23 Balance 31 March 2023 £'000 £'000 £'000 £'000 £'000 £'000 Strategic Housing Fund (Revenue from Additional Council Tax on Second Homes) 6,590 (1,574) 2,231 7,247 Investment in Affordable Housing 3,300 (137) 3,163 Capital Projects 24,722 (16,914) 6,845 1,406 16,059 Lochgilphead and Tarbert Regeneration 2,271 (811) 1,460 Support for Rural Growth Deal 1,058 (302) 756 Asset Management 2,607 (65) (492) 48 2,098 Piers and Harbours Investment Fund 1,643 1,146 2,789 Scottish Government Initiatives 3,141 (1,485) 1,178 2,834 CHORD 349 29 378 Devolved School Management Scheme (DSM) 1,982 (1,717) 1,129 1,394 Energy Efficiency Fund 218 218 Unspent Budget Required for Existing Legal Commitments 475 (15) 16 476 Unspent Third Party Contributions 12,834 (4,031) 18 4,358 13,179 Contributions Carried Forward 166 99 265 Other Previous Council Decisions 4,343 (432) (149) 46 3,808 Redundancy Reserve 1,732 (154) 1,578 Supporting Organisational Change 1,588 (162) 1,426 One Council Property - 369 197 566 Fleet - Timing Delay 499 159 658 Hermitage Park 4 15 19 Electric Vehicle Chargers - - 17 17 COVID-19 8,964 (3,499) (470) 517 5,512 Unspent Budget Carried Forward 10,504 (2,732) (279) 235 5,838 13,566 Total Ring-fenced 88,990 (33,893) (1,124) 7,080 18,413 79,466 Contingency 5,256 - 435 - 5,691 Unallocated 1,835 - 6,516 (7,080) - 1,271 Total General Fund Balance 96,081 (33,893) 5,827 - 18,413 86,428 The contingency balance of £5.691m is 2% of the Council’s budgeted net expenditure for 2023-24.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 76 7 SUPPLEMENTARY NOTES TO THE STATEMENT OF COMPREHENSIVE INCOME AND EXPENDITURE 7.1 Expenditure and Income Analysed by Nature Council’s expenditure and income is analysed as follows: 2021-22 Expenditure/Income 2022-23 £'000 £'000 Expenditure 184,092 Employee benefits expenses 196,213 168,222 Other services expenses 170,691 62,870 Contribution to Argyll and Bute Integration Joint Board 74,391 10,141 Depreciation, amortisation, impairment 35,089 18,207 Interest payments 10,655 1,400 Precepts and levies 1,253 417 Other operating expenditure 390 (103) Net Loss/(Gain) on the disposal of assets (437) 445,246 Total Expenditure 488,245 Income (101,826) Fees, charges and other service income (102,844) (62,870) Income to fund social care services (Argyll and Bute Integration Joint Board) (74,391) (805) Interest and investment income (2,966) (81,648) Income from council tax and non-domestic rates (87,726) (213,132) Government grants and contributions (214,324) (460,281) Total Income (482,251) (15,035) (Surplus)Deficit on the Provision of Services 5,994
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 77 7.2 Revenue from Contracts with Service Recipients 31 March 2022 31 March 2023 £'000 £'000 23,449 28,063 23,449 28,063 Revenue from contracts with service recipients Total Included in Comprehensive Income and Expenditure Statement 8 OTHER OPERATING INCOME AND EXPENDITURE The expenditure of £1.643m shown in the Other Operating Income and Expenditure line on the Statement of Comprehensive Income and Expenditure can be analysed as follows: 2021-22 2022-23 ActualOther Operating Income and Expenditure Actual £'000 £'000 1,419 Dunbartonshire and Argyll & Bute Valuation Joint Board Requisition 1,253 (16) Equal Pay Settlements and Legal Costs (20) 433 Other Operating Income and Expenditure not attributable to Services 410 1,836 Total 1,643 9 AGENCY SERVICES The Council bills and collects non-domestic rates on behalf of the Scottish Government from ratepayers situated within Argyll and Bute. The Council also bills and collects, along with its own council tax, domestic water and sewerage charges on behalf of Scottish Water. In addition, the Council received a small number of funding streams from the Scottish and UK Governments in 2022/23 to support financial hardship experienced by individuals. The Council had no discretion over the terms of the funding and could not use it for service delivery. This means the Council acted as agent only and the grant funding received and paid out are not included in the Council's reserves, CIES or Balance Sheet. In some cases, an administration grant was awarded to the Council to facilitate these payments. This is accounted for as operational income and expenditure and not disclosed here.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 78 2021-22 2022-23 Actual Actual £'000 £'000 25,070 Scottish Government - Contributions (to)/from the non-domestic rates pool 33,179 14,317 Domestic water and sewarage charges collected 15,106 (14,317) Domestic water and sewarage charges paid over to Scottish Water (15,106) 289 Service income from Scottish Water for collection of domestic water and sewerage 265 7 Service income BID levy - Dunoon 7 7 Service income BID levy - Oban 7 - Service income BID levy - Bute 7 - Scottish Child Payment - amount paid out (714) - Scottish Child Payment - amount received from the Scottish Government 714 - BIES Energy Grant - amount paid out (73) - BIES Energy Grant - amount received from the Scottish Government 73 (1,405) COVID - Financial Hardship and Self-Isolation grants paid out (167) 1,405 COVID - Financial Hardship and Self-Isolation funding received from Scottish Government 167 (5,160) COVID - Business Grant Scheme paid out - 5,160 COVID - Business Grant Scheme funding received from Scottish Government - (17,543) COVID - Strategic Framework grants paid out - 17,543 COVID - Strategic Framework funding received from Scottish Government - (7,445) COVID - Other support for businesses (including furlough support) paid out - 7,445 COVID - Other support for businesses (inculding furlough support) funding received from - Scottish Government 25,373 Total 33,465 Agency Income 10 COMMUNITY CARE AND HEALTH (SCOTLAND) ACT 2002 From 1 April 2016 health and social care services were fully integrated as part of the new Health and Social Care Partnership. During 2022-23 the Partnership included provision of services to older people, supporting people with a learning disability and provision of support to adults who have a mental health difficulty. Budgets are currently aligned which means that each Partner organisation holds their own element of the budget and records the income and expenditure that relates to the part of the service for which they are responsible. During 2022-23 income received by the Council from this source amounted to £7.594m and the related expenditure was £10.544m. This can be analysed as follows:
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 79 Income Expenditure Income Expenditure £'000 £'000 Purpose of Services £'000 £'000 3,355 5,203 Care of the Elderly 3,300 5,402 2,857 3,279 Provision of Services for People with Learning Disabilities 2,914 3,615 1,454 1,628 Provision of Services for People with Mental Health Needs 1,380 1,527 7,666 10,110 7,594 10,544 2,362 2,241 833 833 10,028 12,351 TOTAL 8,427 11,377 Additional Covid Response Funding received via NHS for 2022-23 2021-22 2022-23
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 80 11 FEES PAYABLE TO AUDIT SCOTLAND In 2022-23 the following fees relating to external audit and inspection were incurred: 2021-22 2022-23 £'000 £'000 272 Fees payable to Mazars with regard to external audit services carried 310 out by the appointed Auditor 272 Total Remuneration 310 Auditor's Remuneration The figure above includes fees for the audit of the Council’s charitable trusts. Audit Scotland were the Council’s external auditors for 2021-22 and Mazars have been appointed as external auditors for 2022-23. Audit Scotland and Mazars did not undertake any non-audit work in 2021-22 or 2022-23. 12 WASTE MANAGEMENT PUBLIC PRIVATE PARTNERSHIP The Council has entered into a Public Private Partnership for the provision of its waste disposal service. This agreement requires the provider to upgrade or replace three waste disposal sites, two transfer stations and five civic amenity sites. In addition, the provider will also provide composting facilities to meet waste diversion targets. When the agreement ends in September 2026, during financial year 2026- 27, the provider will hand back to the Council the waste disposal facilities with a remaining life of 5 years. The Council has paid a service charge of £6.514m which represents the value of the service provided from 1 April 2022 to 31 March 2023 (£6.028m for 2021-22). Under the agreement the Council is committed to paying the following sums: Future Repayment Periods £'000 2023-2024 6,807 2024-2026 14,064 2026-2027 2,336 Total 23,207 The average service charge equates to £5.163m per annum over the life of the contract.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 81 13 GRANT INCOME The Council credited the following grants to the Comprehensive Income and Expenditure Statement in 2022-23: 2021-22 Grant Income 2022-23 £'000 £'000 Credited to Taxation and Non Specific Grant Income 191,432 Revenue Support Grant 191,265 25,070 Non Domestic Rates 33,179 285 Specific Capital Grant 344 10,822 General Capital Grant 19,187 137 Heritage Lottery Fund 44 1,299 Scottish Timber Transport Strategy 728 1,126 Scottish Government 1,353 195 Strathclyde Partnership for Transport (SPT) 90 189 SUSTRANS - 27 Revenue Contribution to Capital Projects 55 2,620 Other Grants 748 5,000 Other Government Capital Grants - 238,202 Total 246,993 Credited to Services 12,830 Scottish Government Specific Grants 12,869 - Scottish Government Specific Grants - Scotland's Schools for the Future 558 General Capital Grant - Private Sector Housing Improvement Grants 809 17,809 Housing Benefit Subsidy 16,581 5,751 Other Revenue Government Grants 14,787 36,948 Total 45,046
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 82 14 RELATED PARTIES The Council is required to disclose material transactions with related parties – bodies or individuals that have the potential to control or influence the Council or to be controlled or influenced by the Council. Disclosure of these transactions allows readers to assess the extent to which the Council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the Council. The aim of the Financial Reporting Standard dealing with Related Parties is to highlight instances where influence and control has been exercised over an external organisation by the Council, and where an elected member, their close family or someone in their household, has the ability to exercise the influence or control. Elected members and Senior Officers have completed a signed declaration on Related Party Interests and these have been used to compile this disclosure. 14.1 Scottish Government The Scottish Government has effective control over the general operations of the Council – it is responsible for providing the statutory framework, within which the Council operates, provides the majority of its funding in the form of grants and prescribes the terms of many of the transactions that the Council has with other parties (e.g. council tax bills, housing benefits). Grants received from government departments are set out in Note 13 – Grant Income. Members Members of the council have direct control over the Council’s financial and operating policies. The total of members’ allowances paid in 2022-23 is shown in the Remuneration Report. During the year there were three organisations in which members had a significant interest and where the total of transactions exceeded £10,000. 2021-22 Expenditure 2022-23 Expenditure £'000 Transactions in which Members have a significant interest £'000 0 Argyll and Bute Rape Crisis 21 0 S & C Crawford Building Contractors Ltd 81 28 Bookfan Ltd Trading as South Peak Services 69 - Total 171
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 83 14.2 Other Related Bodies This category relates to transactions with entities which are controlled or significantly influenced by the Council. During the year transactions with other related bodies were as follows: 2021-22 Expenditure 2022-23 Expenditure £'000 Related Bodies £'000 4,630 Transactions with related bodies during the year totalled 3,582 Of these, transactions with the following exceeded £10,000: 32 ACHA 210 Dunbritton Housing Association Limited 579 1,827 LINK Group Ltd 34 168 West Highland Housing Association Ltd 96 Fyne Homes 14 514 Oban and Lorn Community Enterprise - Atlantis Leisure 548 15 Argyll and the Isles Tourism Ltd - 215 Islay and Jura Community Enterprise 100 139 Mid Argyll Community Enterprise 70 71 Scotland Excell 73 48 Argyll and Bute Citizens Advice Bureaux 97 149 Bute Advice 227 132 Kintyre Recycling - 158 SEEMIS 92 220 Argyll and the Isles Coast & Countryside Trust 178 380 Carr Gorm 411 122 Argyll & Bute Women's Aid 127 178 Argyll & Bute Care & Repair 241 149 HELP 161 71 COSLA 97 - Glengorm Partnership 60 - North West Mull Community Woodland Company 91 - Mull & Iona Community Trust (MICT) 41 4,588 Total 3,547 Given the relationships the Council has with other organisations and partners it is possible that some related party transactions may exist. However, the purpose of the requirement to complete the disclosure is to provide additional information to the users of the Annual Accounts and, by declaring possible instances, there is no suggestion that any inappropriate transactions have taken place. Please refer to Group Accounts on pages 130 to 136.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 84 15 PROPERTY, PLANT AND EQUIPMENT 15.1 Movement in Property, Plant and Equipment Other Land & Buildings Vehicles Plant & Equipment Community Assets Surplus Assets Assets Under Construction Total 2022-23 Infrastructure Assets £'000 £'000 £'000 £'000 £'000 £'000 £'000 Cost or Valuation At 1 April 2022 428,437 44,428 7,463 1,405 35,344 517,077 Additions 8,671 2,024 1,438 283 10,212 22,628 13,110 Additions financed under a new leasing arrangement - 2,481 1,237 3,718 (8,235) (18) (8,253) Derecognition - Disposals (1,451) (12) (1,463) Assets reclassified (to)/from Held for Sale (381) 376 (5) Other movements in cost or valuation 24,116 (24,116) - At 31 March 2023 453,638 46,440 8,901 3,283 21,440 533,702 Depreciation and Impairments At 1 April 2022 (13,585) (32,630) (9) 3 - (46,221) (13,068) (2,944) (16,012) (8,512) 17,296 17,296 5,288 5,288 - - 1,443 6 1,449 5 5 At 31 March 2023 (2,621) (35,568) (9) 3 - (38,195) Balance Sheet amount at 31 March 2023 451,017 10,872 8,892 3,286 21,440 495,507 235,076 Balance Sheet amount at 31 March 2022 414,852 11,798 7,454 1,408 35,344 470,856 230,478 Movements in 2022-23 Revaluation increases/(decreases) recognised in the Revaluation Reserve Revaluation increases/(decreases) recognised in the Surplus/Deficit on the Provision of Services Depreciation Charge for 2022-23 Depreciation written out to the Revaluation Reserve Depreciation written out to the Surplus/Deficit on the Provision of Services Impairment losses/(reversals) recognised in the Revaluation Reserve Impairment losses/(reversals) recognised in the Surplus/Deficit on the Provision of Services Derecognition - Disposals Other movements in depreciation and impairment
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 85 Other Land & Buildings Vehicles Plant & Equipment Community Assets Surplus Assets Assets Under Construction Total 2021-22 Infrastructure Assets £'000 £'000 £'000 £'000 £'000 £'000 £'000 Cost or Valuation At 1 April 2021 402,408 41,727 5,959 1,634 25,599 477,327 Additions 9,161 4,564 1,504 22 12,210 27,461 15,434 Additions financed under a new leasing agreement - - - - - - 6,420 35 6,455 8,290 (122) - 8,168 Derecognition - Disposals (6) (1,863) - (1,869) Derecognition - Other - Assets reclassified (to)/from Held for Sale (248) (164) (412) 153 Other movements in cost or valuation 2,412 - - (2,465) (53) 53 At 31 March 2022 428,437 44,428 7,463 1,405 35,344 517,077 Depreciation and Impairments At 1 April 2021 (26,267) (31,782) (9) 3 - (58,055) (12,508) (2,711) (15,219) (8,106) 20,042 20,042 5,133 5,133 1,863 1,863 15 15 (3) At 31 March 2022 (13,585) (32,630) (9) 3 - (46,221) Balance Sheet amount at 31 March 2022 414,852 11,798 7,454 1,408 35,344 470,856 230,478 Balance Sheet amount at 31 March 2021 376,141 9,945 5,950 1,637 25,599 419,272 222,947 Comparative Movements in 2021-22 Revaluation increases/(decreases) recognised in the Revaluation Reserve Revaluation increases/(decreases) recognised in the Surplus/Deficit on the Provision of Services Depreciation Charge for 2021-22 Depreciation written out to the Revaluation Reserve Other movements in depreciation and impairment Impairment losses/(reversals) recognised in the Surplus/Deficit on the Provision of Services Derecognition - Disposals
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 86 As permitted by Finance Circular 09-2022 the council has adopted both Statutory Override 1 & 2 relating to infrastructure assets which allow for the following; Statutory Override 1: For accounting periods commencing from 1 April 2021 until 31 March 2024 a local authority is not required to report the gross cost and accumulated depreciation for infrastructure assets. Statutory Override 2: For accounting periods commencing 1 April 2010 until 31 March 2024 the carrying amount to be derecognised in respect of a replaced part of an infrastructure asset is to be taken and accounted for as a nil amount. No subsequent adjustment shall be made to the carrying amount of the asset with respect to that part.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 87 15.2 Valuation of Property, Plant and Equipment IAS 16 – Property, Plant and Equipment has been adapted for the public sector by IPSAS 17 – Property, Plant and Equipment. Under IPSAS 17 each category of Property, Plant and Equipment is valued as follows: 15.2.1 Infrastructure, community assets and assets under construction are valued at historical cost. 15.2.2 Vehicles, plant and equipment are valued at depreciated historical cost as a proxy for fair value. 15.2.3 All other classes of assets are valued at fair value. Where there is no market based evidence of fair value because of the specialist nature of the asset and the asset is rarely sold then an estimate of fair value is made using a depreciated replacement cost approach. The Council carries out a rolling programme that ensures that all Property, Plant and Equipment required to be measured is re-valued at least every five years. Assets identified as Corporate Surplus Assets are valued in accordance with IFRS 13 - Fair Value Measurement. The Balance Sheet value of Corporate Surplus assets at 31 March 2023 was £3.286m. Corporate Surplus assets are valued at their fair value on 31 March each year. Level 2 or 3 inputs were used for most Corporate Surplus asset valuations. Revaluations of Council owned land and property were carried out at 31 March 2023 in accordance with the Council’s rolling programme of revaluations. The revaluations have been carried out in house by the Council’s Estates Service. Valuations of land and buildings were carried out in accordance with the methodologies and basis for estimation set out in the professional standards of the Royal Institution of Chartered Surveyors. The following table shows the progress of the Council’s rolling programme for the revaluation of Other Land and Buildings: Other Land & Buildings £'000 31 March 2023 191,882 31 March 2022 104,252 31 March 2021 58,032 31 March 2020 26,108 31 March 2019 45,683 Total Cost or Valuation 425,958 Valued at Fair Value as at:
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 88 15.3 Depreciation The following useful lives and depreciation rates have been used in the calculation of depreciation: 15.3.1 Buildings – straight-line allocation over the useful life of the property as estimated by the valuer (20 to 60 years) 15.3.2 Infrastructure – straight-line allocation over 40 – 60 years 15.3.3 Vessels – straight line allocation over 25 years 15.3.4 Vehicles, Plant and Equipment - straight-line allocation over the useful life of the asset as determined by a suitably qualified officer (5 to 20 years) 15.4 Summary of Capital Expenditure and Financing Capital expenditure involves the creation of assets, the benefit of which will be available to future rates and Council taxpayers. It is financed from borrowing, capital receipts and capital grants. The cost of the asset is effectively borne over a period of years. In 2022-23 total spending on capital projects was £36.170m. 2021-22 2022-23 £'000 £'000 294,752 Opening Capital Financing Requirement 307,100 Capital Investment: 9,157 Property Plant and Equipment: Other Land and Buildings 8,543 4,564 Vehicles, Plant, Furniture and Equipment 2,024 15,434 Infrastructure Assets 13,110 1,504 Community Assets 1,438 22 Surplus Assets 283 12,210 Assets Under Construction 10,212 4 Property Plant and Equipment acquired under Finance Leases: Other Land and Buildings - DBFM Schools 128 13 Heritage Assets 246 68 Intangible Assets 174 Investment Assets 12 Assets Held for Sale 42,976 Total Capital Investment 36,170 Sources of Finance: (838) Capital Receipts - (21,700) Government Grants (22,549) (735) Capital Financed from Current Revenue (2,938) (2,514) Net Borrowing (20,317) (4,844) Assets Aquired under Finance Leases/Schools NPDO (5,116) 3 Capital Receipts transferred to/(from) Capital Fund (568) (30,628) Total Funding (51,488) 307,100 Closing Capital Financing Requirement 291,782
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 89 15.5 Commitments under Capital Contracts At 31 March 2023, the Council had commitments on capital contracts of £14.937m. This expenditure will be funded from a combination of Government Grants, borrowing and income from selling assets and contributions from Revenue Accounts. Similar commitments at 31 March 2022 were £8.224m. The major commitments are: 2022-23 £'000 Campbeltown Flood Scheme 8,824 Climate Change Project - NDEEF1 1,370 Kilmory Business Park 979 St Muns Primary School - Roof Upgrade 480 Tobermory Harbour Railings and Sea Wall 398 Gibraltar Street, Oban, Public Realm 250 Dunoon Cycle Bothy 246 Clyde Cottage Landscaping Works 230 Park Primary School Landscaping Works 198 Aqualibrium Remidial Works 194 Corran Halls Stage Equipment Replacement 158 Application Project 151 Other projects each less than £0.150m in value 1,458 Total Capital Commitments 14,937 16 HERITAGE ASSETS The main heritage assets held by the Council are two art collections, an archaeology collection and Inveraray Jail and Courthouse. The Council holds other heritage assets which are not valued and shown on the Balance Sheet. Further details on the council’s heritage assets policy can be found in note 1.11. Reconciliation of the carrying value of heritage assets held by the Council: Art Collections Heritage Property Total £'000 £'000 £'000 Cost or Valuation Net Book Value at 1 April 2022 1,600 499 2,099 Additions - 246 246 Disposals - - - Revaluations - - - Impairment Losses/(Reversals) recognised in the Revaluation Reserve - - - - - - At 31 March 2023 1,600 745 2,345 Movements in 2022-23 Transfer from Assets Under Construction
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 90 17 INTANGIBLE ASSETS Intangible assets comprise software licences and carbon reduction commitment allowances purchased in advance. Purchased software licences are shown at cost and this cost is charged to the relevant service lines within the Comprehensive Income and Expenditure Statement over the economic life of the licences, assessed as five years. The movement in intangible assets during the year was: £'000 £'000 Cost or Valuation At 1 April 2022 2,275 2,275 Additions 174 174 Disposals - - Revaluations - - Reclassifications - - At 31 March 2023 2,449 2,449 Amortisation and Impairments At 1 April 2022 (1,671) (1,671) Charge for 2022-23 (45) (45) Disposals - - At 31 March 2023 (1,716) (1,716) Balance Sheet amount at 31 March 2023 733 733 Balance Sheet amount at 31 March 2022 604 604 Movements in 2022-23 Purchased Software Licences Total Intangible Assets
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 91 Total Intangible Assets Comparative Movements in 2021-22 £'000 £'000 Cost or Valuation At 1 April 2021 2,207 2,207 Additions 68 68 Disposals - - Revaluations - - Reclassifications - At 31 March 2022 2,275 2,275 Amortisation and Impairments At 1 April 2021 (1,635) (1,635) Charge for 2021-22 (36) (36) Disposals - - At 31 March 2022 (1,671) (1,671) Balance Sheet amount at 31 March 2022 604 604 Balance Sheet amount at 31 March 2021 572 572 Purchased Software Licences 18 INVESTMENT PROPERTY Investment property has been accounted for in accordance with IAS 4 - Investment Property, except where interpretations or adaptations to fit the public sector are detailed in the Code. The definition of an investment property in the context of the public sector is one that is used solely to earn rentals or for capital appreciation or both. The value of investment property is initially measured at cost and thereafter measured at fair value. The fair value of investment property reflects market conditions at 31 March 2023. Revaluations of investment properties were carried out at 31 March 2023 in house by the Estates Service. 18.1 Movement in Investment Property The movement in investment property during 2022-23 was: Investment Properties £'000 Cost or Valuation At 1 April 2022 2,428 Acquisitions 12 Disposals - Net Gains/Losses from fair value adjustments 130 Transfers (17) At 31 March 2023 2,553 Movements in 2022-23
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 92 18.2 Investment Property Income and Expenditure The following items of income and expenditure have been accounted for in the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement: 2021-22 2022-23 £'000 £'000 148 Rental income from investment property 141 (4) Direct operating expenses arising from investment property (4) 144 137 19 SCHOOLS BUILT UNDER PUBLIC PRIVATE PARTNERSHIP CONTRACTS (PPP) Argyll and Bute Council have two schemes: Schools Non-Profit Distributing Organisation (NPDO) During 2007-08 two secondary schools, two joint campuses and one primary campus, developed as part of the Non-Profit Distributing Organisation (NPDO) variant of a Public Private Partnership (PPP), became operational. When the agreement ends in 2035 the provider will hand the five school complexes back to the Council, it is expected at that point in time each school will have an estimated life of 30 years remaining. Schools Hub Design, Build, Finance and Maintain Contract (DBFM) Campbeltown and Oban High Schools have been built under this type of arrangement which reached Financial Close in March 2016. Campbeltown Grammar School Construction Phase 1 was completed on 19 February 2018 and provided a new secondary school for pupils aged between 12 and 18. The new school has capacity for 500 pupils and replaces the existing Campbeltown Grammar School on the current school site at Hutcheon Road, Campbeltown. Phase 2 which included the demolition of the existing school buildings, provision of a car park, landscaping and 3G artificial turf pitch was completed during 2018-19. Oban High School Construction Phase 1 was completed on 5 April 2018 and provided a new secondary school for pupils between 12 and 18. The new school has capacity for 1300 pupils and replaces the existing Oban High School, on the current school site at Soroba Road, Oban. Phase 2 includes the demolition of the existing school buildings, provision of a car park, landscaping and a pedestrian footway with lighting from the new school facilities to the grass pitches owned by the Council at Glencruitten, Oban was completed during 2018-19.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 93 19.1 Assets Held under Schools NPDO and DBFM Contracts Five schools were constructed under the Schools NPDO Contract; Hermitage Academy, Dunoon Grammar, Lochgilphead Joint Campus, Rothesay Joint Campus and Oban Primary Campus. The construction costs of the buildings, adjusted for revaluations on 31 March 2023 and depreciation to date are included as part of Operational Land and Buildings. As noted above two schools were completed under the Schools DBFM Contract. Oban High School and Campbeltown Grammar have been included within Operational Land & Buildings. Schools DBFM - Other Land & Buildings Schools NPDO - Other Land & Buildings Total Schools Built under PFI Contracts £'000 £'000 £'000 Cost or Valuation At 1 April 2022 66,018 136,962 202,980 Additions at Cost 128 - 128 Transfers - - - Revaluations 5,393 (2,784) 2,609 At 31 March 2023 71,539 134,178 205,717 Depreciation and Impairments At 1 April 2022 - - - Charge for 2022-23 (2,186) (3,162) (5,348) Transfers - - - Revaluations 2,186 3,162 5,348 At 31 March 2023 - - - Balance Sheet amount at 31 March 2023 71,539 134,178 205,717 Balance Sheet amount at 31 March 2022 66,018 136,962 202,980 Movements in 2022-23
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 94 Schools DBFM - Other Land & Buildings Schools NPDO - Other Land & Buildings Total Schools Built under PFI Contracts £'000 £'000 £'000 Cost or Valuation At 1 April 2021 59,224 132,836 192,060 Additions at Cost 4 - 4 Transfers - - - Revaluations 6,790 4,126 10,916 At 31 March 2022 66,018 136,962 202,980 Depreciation and Impairments At 1 April 2021 (5,538) (8,630) (14,168) Charge for 2021-22 (1,748) (3,089) (4,837) Transfers - - - Revaluations 7,286 11,719 19,005 At 31 March 2022 - - - Balance Sheet amount at 31 March 2022 66,018 136,962 202,980 Balance Sheet amount at 31 March 2021 53,686 124,206 177,892 Comparative Movements in 2021-22
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 95 19.2 Schools NPDO Finance Lease Liability The finance lease liability arising from the Schools NPDO contract is as follows: Schools DBFM Schools NPDO Total Schools Finance Lease Liability £'000 £'000 £'000 Balance at 1 April 2022 (53,876) (62,408) (116,284) Additions - - - Repayments 2,000 3,070 5,070 Prior year repayment adjustment - - - Schools Finance Lease Liability at 31 March 2023 (51,876) (59,338) (111,214) Split: Obligations payable within 1 year (1,970) (3,262) (5,232) Obligations payable after 1 year (49,906) (56,076) (105,982) Schools Finance Lease Liability at 31 March 2023 (51,876) (59,338) (111,214) Movements in 2022-23 Schools DBFM Schools NPDO Total Schools Finance Lease Liability £'000 £'000 £'000 Balance at 1 April 2021 (55,909) (65,175) (121,084) Additions - - - Repayments 2,033 2,767 4,800 Prior year repayment adjustment - - Schools Finance Lease Liability at 31 March 2022 (53,876) (62,408) (116,284) Split: Obligations payable within 1 year (2,000) (3,071) (5,071) Obligations payable after 1 year (51,876) (59,337) (111,213) Schools Finance Lease Liability at 31 March 2022 (53,876) (62,408) (116,284) Comparative Movements in 2021-22
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 96 19.3 Payments due to Operator under Schools NPDO Contract The Council is committed to paying the following sums under the Schools NPDO contract: Future Repayment Periods Lifecycle Costs Payment of Interest Service Charges Total Payments £'000 £'000 £'000 £'000 2023 - 2024 411 6,200 5,843 15,716 2024 - 2028 2,401 20,851 26,391 64,792 2028 - 2033 3,582 15,894 37,404 85,704 2033 - 2035 873 2,384 11,494 26,854 Total 7,267 45,329 81,132 193,066 Repayment of Liability £'000 15,149 28,824 12,103 59,338 3,262 19.4 Payments due to Operator under Schools DBFM Contract The Council is committed to paying the following sums under the Schools DBFM contract: Future Repayment Periods Payment of Interest Service Charges Total Payments £'000 £'000 £'000 2023 - 2024 2,244 920 5,134 2024 - 2028 8,206 4,351 20,827 2028 - 2033 8,471 7,550 26,743 2033 - 2038 3,424 11,145 27,626 2038 - 2043 2,208 7,762 27,827 - Total 24,553 31,728 108,157 51,876 Repayment of Liability £'000 8,270 10,722 1,970 13,057 17,857 20 OPERATING LEASES 20.1 Operating Leases – Amounts Paid to Lessors The Council uses land, buildings, vehicles, plant and equipment financed under the terms of an operating lease. The amounts paid under these arrangements in 2022-23 were as follows: 2021-22 2022-23 £'000 £'000 226 Land and Buildings 552 1,322 Vehicles 1,407 176 Plant and Equipment 180 1,724 Total 2,139
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 97 20.2 Assets Held Under Operating Leases The Council was committed at 31 March 2023 to making payments of £2.734m under operating leases comprising the following elements: Other Land and Buildings Vehicles, Plant and Equipment Other Land and Buildings Vehicles, Plant and Equipment £'000 £'000 £'000 £'000 161 286 Due within 1 year 213 184 574 314 Due between 1 and 5 years 691 162 1,579 76 Due after 5 years 1,479 5 2,314 676 Value at 31 March 2,383 351 31st March 2022 31st March 2023 21 FINANCE LEASES 21.1 Finance Leases – Amounts Paid to Lessors During 2017-18 the Council purchased a new cremator for Cardross Crematorium under a finance lease arrangement. The amount paid under this arrangement in 2022-23 was as follows: 2021-22 2022-23 £'000 £'000 63 Plant and Equipment 63 63 Total 63 21.2 Assets Held Under Finance Leases Assets purchased under a finance leases are included within the assets of the Council and depreciated over the life of the asset as follows: 2021-22 2022-23 £'000 Vehicles, Plant and Equipment £'000 427 Value at 1 April 376 - Additions - (51) Depreciation (51) 376 Value at 31 March 325
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 98 21.3 Finance Lease Liability The Council was committed at 31 March 2023 to making payments of £0.349m under finance leases comprising the following elements: Movements in 2022-23 £'000 Balance at 1 April 2022 (396) Additions - Repayments 47 Finance Lease Liability at 31 March 2023 (349) Split: Obligations payable within 1 year (63) Obligations payable between 1 and 5 years (251) Obligations payable after 5 years (92) Finance Lease Obligations at 31 March 2023 (406) Less Interest element of lease 57 Finance Lease Liability at 31 March 2023 (349) Comparative Movements in 2021-22 £'000 Balance at 1 April 2021 (440) Additions - Repayments 44 Finance Lease Liability at 31 March 2022 (396) Split: Obligations payable within 1 year (63) Obligations payable between 1 and 5 years (251) Obligations payable after 5 years (155) Finance Lease Obligations at 31 March 2022 (469) Less Interest element of lease 73 Finance Lease Liability at 31 March 2022 (396)
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 99 22 LONG TERM DEBTORS 31st March 2022 31st March 2023 £'000 £'000 13 House Loans 12 750 Waste PPP Historic Contamination Fund 750 1,465 Charging Orders - Care Home Fees 1,801 3,229 Strategic Housing Fund Loans to Registered Social Landlords 3,024 335 Other Long Term Debtors 293 5,792 Total Long Term Debtors 5,880 23 DEBTORS £'000 £'000 £'000 £'000 19,410 Arrears of Local Taxation 18,990 (16,910) Less: Impairment of Bad Debts (16,844) 2,500 2,146 974 Housing Benefits Overpayments 435 (910) Less: Impairment of Bad Debts (299) 64 136 3,351 Debtor Accounts 3,382 (1,067) Less: Impairment of Bad Debts (1,172) 2,284 2,210 721 Net Debtor to Scottish Government for Non Domestic Rates 2,742 2,436 VAT Recoverable from HMRC 4,316 68 Strategic Housing Fund Loans due within 1 Year 139 4,449 Accrued Income 7,444 5,741 Other Debtors 14,947 18,263 Total Debtors 34,080 31 March 202331 March 2022
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 100 24 ASSETS HELD FOR SALE The movement in assets held for sale during 2022-23 was: 2021-22 2022-23 £'000 £'000 1,865 1,509 228 17 - Additions - (12) Revaluation losses - 134 Revaluation gains 144 - Impairment losses - - Assets declassified as "Held for Sale" (Property, Plant and Equipment) - (706) Assets Sold (116) 1,509 Balance Sheet amount at 31st March 2023 1,554 Balance Sheet amount at 1st April 2022 Assets newly classified as "Held for Sale" (Property, Plant and Equipment) Movements 25 CASH AND CASH EQUIVALENTS The balance of Cash and Cash Equivalents is made up of the following elements: 31 March 2022 31 March 2023 £'000 £'000 1 4 74 Cash in transit (218) 5,117 Short term deposits with banks 1,976 19,600 Short term deposits in Money Market Funds 6,850 (5,064) Bank Current Accounts (14,694) 19,728 Total Cash and Cash Equivalents (6,082) Cash held by the Authority
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 101 26 CREDITORS 31 March 2022 31 March 2023 £'000 £'000 7,544 Accrued Payrolls and Superannuation 11,707 2,880 Accrued Employer's National Insurance Contributions and PAYE 3,092 6,927 Accrual for Short Term Accumulating Absences 7,588 11 Creditors System Liability 96 12,117 Accrued Expenditure 9,030 2,148 Health and Social Care Partnership Creditor 5,006 387 RCGF Grant Income 1,022 - Housing Benefit Subsidy - 856 Trust Funds 854 - Net Creditor to Scottish Government for Non Domestic Rates 8,413 Other Creditors 11,582 41,283 Total Creditors 49,977 27 FINANCIAL INSTRUMENTS DISCLOSURES 27.1 Types of Financial Instruments Accounting regulations require the “Financial Instruments” (investment, lending and borrowing of the Council) shown on the balance sheet to be further analysed into various defined categories. The investments, lending and borrowing disclosed in the Balance Sheet are made up of the following categories of “Financial Instruments”: Long Term Current Long Term Current £'000 £'000 £'000 £'000 Investments and Lending 6,284 38,434 Loans and Receivables 11,372 87,994 Borrowing 273,969 64,282 239,187 66,947 31 March 202331 March 2022 Financial Liabilities at amortised cost 27.2 Fair Value of Assets and Liabilities Carried at Amortised Cost Financial assets (represented by lending and receivables) and financial liabilities (represented by borrowings) are carried in the Balance Sheet at amortised cost. Their fair value can be assessed by calculating the present value of the cash flows that will take place over the remaining period of the instrument, using the following assumptions: 27.2.1 Estimated interest rates at 31 March 2023 for loans from the PWLB were taken from the appropriate interest rate notice and for other loans receivable and payable from market rates obtained by our treasury advisors. 27.2.2 No early repayment or impairment is recognised.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 102 27.2.3 Where an instrument will mature in the next 12 months, the carrying amount is assumed to approximate to fair value. 27.2.4 The fair value of trade and other receivables is taken to be the invoiced or billed amount. The fair values are calculated as follows: Carrying Amount Fair Value Carrying Amount Fair Value £'000 £'000 £'000 £'000 Lending 44,718 44,954 Loans and Receivables 99,366 99,366 Borrowing 338,251 401,463 Financial Liabilities 306,134 324,323 31 March 2022 31 March 2023 The fair value is greater than the carrying amount because the Council’s lending figure includes a number of loans where the interest rate receivable is higher than the rates available for similar loans at the Balance Sheet date. The commitment to receive interest above the current market rates increases the amount the Council would receive if it agreed the early repayment of loans. 27.3 Gains and Losses on Financial Instruments There are no gains and losses recognised in the Comprehensive Income and Expenditure Statement in relation to Financial Instruments. 27.4 Nature and Extent of Risks arising from Financial Instruments The Council’s management of treasury risks actively works to minimise the Council’s exposure to the unpredictability of financial markets and to protect the financial resources available to fund services. The Council has fully adopted CIPFA’s Code of Treasury Management Practices and has written principles for overall risk management as well as written policies and procedures covering specific areas such as credit risk, liquidity risk and market risk. 27.5 Credit Risk Credit risk arises from the short-term lending of surplus funds to banks, money market funds, building societies and other local authorities as well as credit exposures to the Council’s customers. It is the policy of the Council to place deposits only with a limited number of high quality banks and money market funds whose credit rating is independently assessed as sufficiently secure by the Council’s treasury advisers and to restrict lending to a prudent maximum amount for each institution. The following analysis summarises the Council’s potential maximum exposure to credit risk, based on past experience and current market conditions. No credit limits were exceeded during the financial year and the Council expects full repayment on the due date of deposits placed with its counterparties.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 103 Amount at 31 March 2023 Historical Experience of Non-payment adjusted for Market Conditions at 31 March 2023 Estimated Maximum Exposure to Default and Uncollectability £'000 % £'000 8,826 - - Deposits with Banks and Money Market Funds The information in respect of the Council’s debtors can be found in note 22 and 23. The Debtor Accounts represents the amounts owed by the Council’s customers; Other Debtors include prepaid expenditure, accrued income and money owed to the Council in respect of projects being carried out under partnerships where the Council is the lead partner. The bad debt provision shown in note 23 represents the Council’s assessment of the likely recoverability of the debt outstanding. The credit risk around unprovided for debt is considered to be low. Debtors relate to the normal business of the Council and credit is issued on the Council’s standard credit terms. There are no significant amounts past due but not impaired where recoverability is considered to be an issue. 27.6 Liquidity Risk The Council’s main source of borrowing is the Treasury’s Public Works Loans Board (PWLB). There is no significant risk that the Council will be unable to raise finance to meet its commitments under Financial Instruments. The Council has safeguards in place to ensure that a significant proportion of its borrowings does not mature for repayment at any one time in the future to reduce the financial impact of re- borrowing at a time of unfavourable interest rates. The Council’s policy is to ensure that not more than 30% of the loans are due to mature within any financial year through a combination of prudent planning of new loans taken out and, where it is economic to do so, making early repayments. The maturity analysis of financial liabilities is as follows: 31 March 2022 31 March 2023 £'000 £'000 64,281 Less than one year 72,715 5,284 Between one and two years 5,357 17,690 Between two and five years 19,048 250,996 More than five years 209,014 338,251 306,134 Maturity analysis of financial liabilities All other amounts due to the Council for council tax, non-domestic rates and other income are due to be paid in less than one year. 27.7 Market Risk Changes in market interest rates influence the interest payable on borrowings and on interest receivable on surplus funds invested. For example, a rise in interest rates would mean an increase in the interest charged on borrowing at variable rates and an increased cost to the taxpayer. An increase in interest rates would also mean an increase in the income received on lending at variable rates and a reduction in cost for the taxpayer.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 104 Changes in market rates also affect the notional “fair value” of lending and borrowing. For example, a rise in interest rates would reduce the “fair value” of both lending and borrowing at fixed rates. Changes in “fair value” of lending and borrowing do not impact upon the taxpayer and are confined to prescribed presentational aspects in the Accounts. The Council has a variety of strategies for managing the uncertainty of future interest rates and the financial impact on the Council. It is the policy of the Council to limit its exposure to variable rate borrowing to a maximum of 30% of what it borrows. During periods of falling rates and where it is economically advantageous to do so, the Council will consider the repayment and restructuring of fixed interest rate debt. The Council takes the daily advice from its specialist treasury advisers and actively monitors changes in interest rates to inform decisions on the lending of surplus funds, new borrowings and restructuring of existing borrowings. Any potential for a financial impact on the Council is also significantly limited by the Scottish Government’s grant distribution mechanism that automatically adjusts for changes in interest rates in the Government Grant support the Council receives for “loan charges”. To illustrate the impact of changes in interest rates upon the Council, the following table shows the financial effect if rates had been 1% higher at 31 March 2023, with all other variables held constant: 31 March 2023 Impact on tax-payer £'000 Increase on interest payable on variable rate borrowings 104 Increase in interest receivable on variable rate lending - Increases in government grant receivable for “loan charges” - Net effect on Statement of Comprehensive Income & Expenditure 104 31 March 2023 Other accounting presentational changes £'000 A decrease in the “fair value” of fixed rate borrowing (disclosure confined to the notes to the financial statements) (1,289) The impact of a 1% fall in the interest rates would be as above but with the changes being reversed. 27.8 Price Risk The Council has no investment classified as “available-for-sale”. 27.9 Foreign Exchange Risk The Council does not lend or borrow in foreign currencies and has no exposure to gains or losses arising from movements in exchange rates. 27.10 Short-Term Deposits
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 105 The short-term deposits arise as a result of the timing of expenditure and associated income and movements in fund and revenue balances. The Council adopts a proactive but prudent approach to its Treasury Management operations, which are governed by the fully revised edition of CIPFA’s Code of Practice on Treasury Management. 31 March 2022 31 March 2023 £'000 £'000 24,717 Banks and Money Market Funds 8,826 27.11 Soft Loans The Council has no material soft loans at 31 March 2023, on which no interest was being charged. 27.12 Short-Term Borrowing The Common Good and the various Trust Funds administered by the Council had monies temporarily invested with the Council’s loans fund during the year. The amounts at 31 March 2023 are shown in the table below. Further details of the nature and amounts of the funds of the Common Good and Trust Funds are shown in notes 36 and 37. 31 March 2022 31 March 2023 £'000 £'000 139 Common Good 144 856 Trust Funds 854 28 OTHER LIABILITIES Other liabilities consist of liabilities which by arrangement are payable at some point in the future or paid off by an annual sum over a period of time. Other liabilities total £112.313m as at 31 March 2023 and comprise the following:
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 106 Opening Balance 1 April 2022 Movement in Year Closing Balance 31 March 2023 £'000 £'000 £'000 (396) 47 (349) (116,284) 5,070 (111,214) (750) - (750) Total Other Liabilities (117,430) 5,117 (112,313) Split: Short Term Liabilities (due within 1 year) (5,280) Long Term Liabilities (due after 1 year) (107,033) Total Other Liabilities (112,313) Movements in 2022-23 Finance Lease Liability (See note 20.3) Schools Finance Lease Liability (See note 18.2) Land Contamination 29 PROVISIONS Opening Balance 1 April 2022 Additional Provision Amounts Used Unused Amounts Reversed Closing Balance at 31 March 2023 £'000 £'000 £'000 £'000 £'000 (43) 30 (13) Employee Settlement Provision (51) (51) SRC Intromissions - (19) (19) (90) (18) (108) (174) (53) 174 (53) Service Choices Redundancy Costs (77) (14) 64 11 (16) (1,989) (347) (2,336) (223) (48) 34 (237) Litigation Claims (221) 25 (196) Insurance Excess Provision (10) 10 - (1,480) (584) 153 1,046 (865) Total Provisions (4,307) (1,134) 242 1,305 (3,894) Split: Short Term Provisions (due within 1 year) (1,450) Long Term Provisions (due after 1 year) (2,444) Total Other Liabilities (3,894) NPDO and Hub DBFM Payments Equal Pay Claims Commercial Rent Balances Income due to Registered Social Landlords Landfill Sites - Restoration and Aftercare Costs Utilities Provision A provision was created at the end of 2005-06 in relation to employees in catering, cleaning and home care services who had not accepted the Council’s equal pay settlement. There may be further outstanding claims where the settlement amount cannot be estimated reliably enough to provide for the costs. A provision has been created in respect of Employee Settlement costs of £0.051m.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 107 A provision in respect of Strathclyde Regional Council Intromissions for £0.019m has been created mainly in relation to historic cases. The Council reduced the discount on Council Tax from second homes to 10% during 2005-06. The additional Council Tax income invoiced during 2022-23 amounted to £2.231m; this amount is to be paid to registered social landlords to invest in social housing. A provision for cash not yet collected has been created amounting to £0.108m. There is a provision for Commercial Rents where arrangements have been put in place for repayment over a number of years. The provision reflects the uncertainty of collection of the debt. Liabilities have arisen in respect of employees who will be made redundant as a result of savings options agreed. The cost for any employee, whose contract has been terminated on or before 31 March 2023 has been incurred in year. For the employees who have confirmed acceptance of redundancy but have left or are leaving after 31 March 2023, a provision of £0.016m has been created. A provision for landfill sites was created in 2014-15 reflecting the Council’s liability for restoration and ongoing maintenance in respect of landfill sites operated by the Council, at Glengorm, Gartbreck and Gott Bay. The landfills sites were revalued at 31 March 2023 and the provision for restoration and aftercare increased to £2.336m. These have been provided for based on the net present value of estimated future costs. The utilities provision was created during 2011-12 to cover a potential liability in relation to discrepancies in charges for utility costs, £0.048m has been reversed during 2022-23 and a further £0.034m additional provision has been added resulting in a total provision of £0.237m. A legal litigation provision was created in 2020-21 as the Council is currently involved in several ongoing cases that will incur costs into future years. The provision is based on sums invoiced and anticipated future costs. The NPDO provision for withheld sums from the Unitary Charge paid to ABC Schools which relate to disputed performance deductions and unbilled utility costs. The HUB DBFM provision for withheld sums from the Monthly Service Payment paid to Hub North Scotland (O&C) Ltd which relate to disputed performance deductions. 30 CAPITAL GRANTS RECEIVED IN ADVANCE There were no Capital Grants received in advance for 2022-23. 31 DEFINED BENEFIT PENSION SCHEMES Participation in Pension Schemes As part of the terms and conditions of employment of its officers, the Council makes contributions towards the cost of post-employment benefits. Although these benefits will not actually be payable until employees retire, the Council has a commitment to make the payments (for those benefits) and to disclose them at the time that employees earn their future entitlement. The Council participates in two separate pension schemes which meet the needs of employees in particular services. Both schemes provide members with defined benefits related to pay and service. The schemes are as follows:
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 108 Teachers The Scottish Teachers’ Superannuation Scheme is an unfunded scheme administered by the Scottish Government. This means that liabilities for the benefits provided cannot be identified by the Council. The scheme is therefore accounted for as if it were a defined contribution scheme where no liability for future payments of benefits is recognised in the balance sheet and revenue accounts are charged with the employer’s contributions payable to the Scottish Government in the year. Local Government Pension Scheme This is administered by Strathclyde Pension Fund – this is a funded defined benefit final salary scheme, meaning that the Council and employees pay contributions into a fund, calculated at a level intended to balance the pension’s liabilities with investment assets. The contributions are based on rates determined by the Fund’s professionally qualified actuary and based on triennial valuations of the Fund. The principal risks to the Council of the scheme are the longevity assumptions, statutory changes to the scheme, changes to inflation, bond yields and the performance of the equity investments held by the scheme. These are mitigated to a certain extent by the statutory requirements to charge to the General Fund the amounts due by statute as described in the accounting policies note. 31.1 Accrued Pensions Contribution Due to the timing of salary processing, not all employee and employer contributions have been paid to the pension schemes by the 31 March 2023. These payments have been accrued and are included within the creditors figure on the Balance Sheet. These have been paid during April 2023. The amounts are as follows: 31.1.1 Local Government Pension Scheme – £1.837m 31.1.2 Teachers’ Scheme – £1.104m 31.2 Transactions in Respect of the Local Government Pensions Scheme The latest formal valuation of the Strathclyde Pension Fund for funding purposes was at 31 March 2020. The independent actuaries appointed by the Council are Hymans Robertson and they have assumed that employees have continued to earn new benefits on the same basis as the latest formal valuation and that the employer’s pensionable payroll over the year to 31 March 2023 remains substantially stable with new entrants replacing any leavers. We recognise the cost of retirement benefits in the Net Cost of Services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge we are required to make against Council Tax is based on the cash payable in the year, so the real cost of retirement benefits is reversed out of the General Fund via the Movement in Reserves Statement. The following transactions have been made in the Comprehensive Income and Expenditure Statement and the General Fund via the Movement in Reserves Statement during the year:
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 109 2021-22 2022-23 £'000 £'000 37,756 Current Service Cost 36,689 197 Past Service Cost (Including Curtailments) 637 37,953 Net Cost of Services 37,326 1,864 Net Interest Expense 141 39,817 37,467 (46,314) Return on Assets (excluding amounts included in net interest) 43,497 1,795 Other Experience (see note (i) below) 46,257 (66,129) Change in Financial and Demographic Assumptions (337,163) (70,831) (209,942) Statement of Movement in Reserves: (23,700) (19,970) 16,117 Employer's Contributions Payable to the Scheme 17,497 Comprehensive Income and Expenditure Statement: Cost of Services: Total Post Employment Benefit Charged to the Surplus or Deficit on the Provision of Services Other Post Employment Benefit Charged to the Comprehensive Income and Expenditure Statement Total Post Employment Benefits Charged to the Comprehensive Income and Expenditure Statement Reversal of net charges made to the Surplus or Deficit for the Provision of Services for post employment benefits in accordance with the Code Actual Amount charged against the General Fund Balance for pensions in the year: Service cost comprising: (i) A measure of the difference between actual experience and that expected based upon a set of actuarial assumptions, during the period between two actuarial valuation dates, as determined in accordance with a particular cost method. (ASOP No. 4)
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 110 31.3 Assets and Liabilities in Relation to Post-Employment Benefits Reconciliation of present value of the scheme liabilities (defined benefit obligation): 2021-22 2022-23 £'000 £'000 897,836 871,242 37,756 Current Service Cost 36,689 197 Past Service Costs including Curtailments 637 18,152 Interest Cost 23,775 4,457 Contributions by Scheme Participants 4,833 (64,334) Re-measurement (Gains) and Losses (290,906) (22,822) Estimated Benefits Paid (23,398) 871,242 Defined Benefit Obligation at 31 March 23 622,872 Defined Benefit Obligation at 1 April 22 Reconciliation of fair value of the scheme (plan) assets: 2021-22 2022-23 £'000 £'000 815,522 875,876 Re-measurement (Gains) and Losses: 46,314 Expected Rate of Return on Pension Fund Assets (43,497) - Actuarial (Gains) and Losses - 16,288 Interest Income on Plan Assets 23,634 16,117 Employers Contributions 17,497 4,457 Contributions by Scheme Participants 4,833 (22,822) Estimated Benefits Paid (23,398) 875,876 Fair Value of Employer Assets at 31 March 23 854,945 Fair Value of Employer Assets at 1 April 22 The expected return on scheme assets is determined by considering the expected returns available on the assets underlying the current investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the Balance Sheet date. Expected returns on equity investments reflect long-term real rates of return experienced in the respective markets. 31.4 Pensions Assets and Liabilities Recognised in the Balance Sheet 2021-22 2022-23 £'000 Local Government Pension Scheme £'000 (846,815) Present Value of Funded Liabilities (602,697) (24,427) Present Value of Unfunded Liabilities (20,175) 875,876 Fair Value of Employer Assets 854,945 4,634 Surplus/(Deficit) in the Scheme 232,073 The liabilities show the underlying commitments that the Council has in the long run to pay post- employment (retirement) benefits.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 111 31.5 Analysis of Pension Fund’s Assets Argyll and Bute Council’s share of the Pension Fund’s assets at 31 March 2023 comprised: 2021-22 2022-23 £'000 £'000 22,287 Cash and Cash Equivalents 16,196 Equity Instruments (by industry type) 41,032 Consumer 38,354 38,595 Manufacturing 47,672 9,115 Energy and Utilities 4,279 24,122 Financial Institutions 18,201 29,269 Health and Care 30,411 50,860 Information Technology 29,565 - Other - 192,993 Sub-total Equity Instruments 168,482 Bonds (by sector) - Corporate - - Government - - Sub-total Bonds - Real Estate 73,866 UK Property 70,490 - Overseas Property - 73,866 Sub-total Real Estate 70,490 171,465 Private Equity (All) 210,135 Investment Funds and Unit Trusts 324,322 Equities 283,323 88,462 Bonds 98,598 301 Commodities 334 769 Infrastructure 5,490 1,411 Other 1,898 415,265 Sub-total Investment Funds and Unit Trusts 389,643 Derivatives - Forward Foreign Exchange Contracts (1) - Other - - Sub-total Derivatives (1) 875,876 Total Assets 854,945
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 112 2021-22 2022-23 £'000 Fair Value of Pension Fund Assets £'000 Equity Securities 192,575 Quoted in an Active Market 166,949 418 Not Quoted in an Active Market 1,533 192,993 Sub-total Equity Securities 168,482 31.6 Basis for Estimating Assets and Liabilities The Council’s share of the liabilities of Strathclyde Pension Fund have been assessed on an actuarial basis using the projected unit method, an estimate of the pensions that will be payable in future years dependent on the assumptions about mortality rates, salary levels, etc. The principal assumptions used by the actuary have been: 2021-22 2022-23 Years Mortality assumptions Years 19.6 Longevity at 65 for current pensioners: Men 19.3 22.4 Women 22.2 21.0 Longevity at 65 for future pensioners: Men 20.5 24.5 Women 24.2 2021-22 2022-23 % Financial Assumptions % 3.2% Rate of Inflation (CPI) 3.0% 3.9% Rate of Increase in Salaries 3.7% 3.2% Rate of Increase in Pensions (CPI) 3.0% 2.7% Rate for discounting scheme liabilities 4.8% 2021-22 2022-23 % Long-term Expected Rate of Return on Assets in the Fund % 2.7% Equity Investments 4.8% 2.7% Bonds 4.8% 2.7% Property 4.8% 2.7% Cash 4.8% An allowance is included for future retirements to elect to take 50% of the maximum additional tax-free cash up to HMRC limits for pre-April 2009 service and 75% of the maximum tax-free cash for post-April 2009 service. 31.7 Asset and Liability Matching (ALM) Strategy The main fund (Fund 1) of Strathclyde Pension fund does not have an asset and liability matching strategy (ALM) as this is used mainly by mature funds. The Fund does match, to the extent possible, the types of assets invested to the liabilities in the defined benefit obligation. As is required by the pensions and investment regulations, the suitability of various types of investment has been considered, as has the need to diversify investments to reduce the risk of being invested into too narrow a range.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 113 31.8 Impact on the Council’s Cash Flow The objectives of the Fund are to keep employers’ contributions at as constant a rate as possible. The Fund has agreed a strategy to achieve a funding rate of 100% in the longer term. The Scheme is a multi- employer defined benefit plan and employers’ contributions have been determined so that employee and employer rates are standard across all participating Local Authorities. Employer’s contributions have been set at 19.3% for 2023-2024. The total contributions expected to be made to the Local Government Pension Scheme by the Council in the year to 31 March 2024 is £15.563m. This is based on an assumed pensionable payroll of £80.636m. The assumed weighted average duration of the defined benefit obligation for the Council falls into the “Medium” duration category which is between 17 and 23 years (this is different from the mortality assumptions quoted in the table above in “Basis for Estimating Assets and Liabilities”). 31.9 Teachers Pensions – Administered By Scottish Public Pensions Agency Teachers employed by the Council are members of the Scottish Teachers’ Superannuation Scheme, administered by the Scottish Public Pensions Agency. The Scheme is an unfunded statutory public service pension scheme with benefits underwritten by the UK Government. The Scheme is financed by payments from employers and from those current employees who are members of the Scheme and paying contributions at progressively higher marginal rates based on pensionable pay, as specified by the regulations. Employers currently pay a contribution rate of 23% - about two thirds of the cost of an individual's pension. This took effect from 1 September 2019. The Council has no liability for other employers’ obligations to the multi-employer scheme. As the scheme is unfunded there can be no deficit or surplus to distribute on the wind-up of the Scheme or withdrawal from the Scheme. The scheme is an unfunded multi-employer defined benefit scheme. It is accepted that the scheme can be treated for accounting purposes as a defined contribution scheme in circumstances where the Authority is unable to identify its share of the underlying assets and liabilities of the scheme. At the last valuation a shortfall of £1.3 billion was identified in the notional fund which will be repaid by a supplementary rate of 4.5% of employers’ pension contributions for fifteen years from 1 April 2015. This contribution is included in the 23% employers’ contribution rate. As a proportion of the total contributions into the Teachers’ Pension Scheme during the year ended 31 March 2023, the council’s own contributions equate to 1.48%. 9,497 Amount Paid Over (£'000) 9,853 23.00% Rate of Contribution (%) 23.00% 514 Amount of Added Years Awarded by the Council (£'000) 508 2022-232021-22 The contributions due to be paid to the Teacher’s Scheme by the Council in the next financial year are estimated to be £10.883m.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 114 32 UNUSABLE RESERVES Movements in the Council’s unusable reserves are detailed in the Statement of Movement in Reserves. 32.1 Revaluation Reserve The Revaluation Reserve contains the gains made by the Council arising from increases in the value of its Property, Plant and Equipment. The balance is reduced when assets with accumulated gains are: Revalued downwards or impaired and the gains are lost Used in the provision of services and the gains are consumed through depreciation, or Disposed of and the gains are realised. The reserve contains only revaluation gains accumulated since 1 April 2007, the date that the Reserve was created. Accumulated gains arising before that date are consolidated into the balance on the Capital Adjustment Account. 32.2 Capital Adjustment Account The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or additions to those assets under statutory provisions. The Account is debited with the cost of acquisition, construction or subsequent costs as depreciation, impairment losses and amortisations which are charged to the Comprehensive Income and Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert current and fair value figures to a historical cost basis). The Account is credited with the amounts set aside by the Council as finance for the costs of acquisition, construction and subsequent costs. The Account contains accumulated gains and losses on Investment Properties. The Account also contains revaluation gains accumulated on Property, Plant and Equipment before 1 April 2007, the date the Revaluation Reserve was created to hold such gains. 32.3 Financial Instruments Adjustment Account The Financial Instruments Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for income and expenses relating to certain financial instruments and for bearing losses or benefiting from gains per statutory provisions. The Council uses the Account to manage premiums paid on the early redemption of loans. Premiums are debited to the Comprehensive Income and Expenditure Statement when they are incurred, but reversed out of the General Fund Balance to the Account in the Movement in Reserves Statement. Over time, the expense is posted back to the General Fund Balance in accordance with statutory arrangements for spreading the burden on Council Tax. 32.4 Pensions Reserve The Pensions Reserve absorbs the timing differences arising from the different arrangements for accounting for post-employment benefits and for funding benefits in accordance with statutory provisions. The Council accounts for post-employment benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the Council makes employer’s contributions to pension funds. The debit balance on the Pensions Reserve therefore shows a substantial shortfall in the benefits earned by past and current employees and the resources the Council has set aside to meet them. The statutory arrangements will ensure funding will have been set aside by the time the benefits come to be paid.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 115 32.5 Accumulated Absences Account The Accumulated Absences Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for compensated absences earned but not taken in the year, e.g. annual leave entitlement carried forward at 31 March. Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from the Account. 33 USABLE RESERVES Movements in the Council’s usable reserves are detailed in the Statement of Movement in Reserves. 33.1 Capital Funds The Council holds two funds which make up the Capital Funds total in the Statement of Movement in Reserves, these are: Usable Capital Receipts Reserve During the 2006-07 financial year, and prior to the transfer of the Council’s housing stock during November 2006, the receipts from the sale of council houses were transferred to the Usable Capital Receipts Reserve. The amounts held in this reserve can only be used for social housing capital expenditure. Capital Fund During the 2007-08 financial year the Council established a Capital Fund under Section 22 of Schedule 3 of the Local Government (Scotland) Act 1975. All receipts from capital disposals are to be paid into this fund with effect from 14 February 2008. The movement in the Usable Capital Receipts Reserve and Capital Fund are as follows: Usable Capital Receipts Reserve Capital Fund Total Capital Funds £'000 £'000 £'000 Balance at 1 April 2022 2,877 1,537 4,414 Proceeds of Disposals - 568 568 Transfer to Capital Adjustment Account - (568) (568) Contribution to Capital Fund From Revenue - - - Interest Earned 57 31 88 Balance at 31 March 2023 2,934 1,568 4,502 Movements in 2022-23 33.2 Repairs and Renewals Fund The movement in the Education Repairs and Renewals Fund is as follows: Balance at 1 April 2022 Contribution from Revenue Interest Earned Contribution to Revenue Balance at 31 March 2023 £'000 £'000 £'000 £'000 £'000 Education 2,682 (816) 49 1,001 2,916 Total 2,682 (816) 49 1,001 2,916 Movements in 2022-23
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 116 34 CONTINGENT LIABILITIES 34.1 Equal Pay Claims The Council settled a number of equal pay claims during 2017-18, however there are a small number remaining where the outcome of the applications are unknown and there is insufficient information to allow the potential cost of these claims to be provided for. There is also the potential for other equal pay claims whose costs may be met by the Council. 34.2 Goodwin Judgement The Social Security Act 1986 introduced changes to survivor pensions which resulted in most public service pension schemes providing survivor benefits to widowers (male survivors in opposite-sex marriages) based on the female spouse’s service from 6 April 1988 onwards. Since the introduction of civil partnerships and same sex marriages, public service pension schemes have provided survivor benefits in respect of both which have been in line with those paid to widowers. An employment tribunal (the Goodwin case) concluded on 30 June 2020 that a female member in an opposite sex marriage is treated less favorably than a female in a same sex marriage or civil partnership, and that treatment amounts to direct discrimination on grounds of sexual orientation. Where schemes contain provisions deemed discriminatory, those provisions must be dis-applied as being contrary to the non-discrimination rule set out in section 61 of the Equality Act 2010. In light of this ruling the Chief Secretary to the Treasury has confirmed that amendments would be made to the Teachers’ Pension Scheme and other public service pension schemes so that “surviving male same-sex and female same-sex spouses and civil partners will, in certain cases, receive benefits equivalent to those received by widows of opposite sex marriages” There is still uncertainty surrounding the potential remedy to the Goodwin judgement however the Council’s actuaries have estimated the potential impact of implementing a solution to correct the past underpayment of spouses’ benefits to be circa 0.1% - 0.2% of gross obligations. This would amount to £0.623m at 0.1% for the Council or £1.246m at 0.2%. As there is still uncertainty over the remedy and the potential impact no provision has been made in the accounts at the current time. 34.3 Other Legal Challenges There may be other legal challenges on-going which could result in future liabilities. 35 TERMINATION BENEFITS A number of savings options have been agreed at Council budget meetings to balance the Council budget. A number of these savings options were reliant on a reduction in the Councils staffing levels. The Council had forewarning of the level of savings required to balance the budget and had previously asked all Council employees to express an interest in voluntary redundancy. As a result of the budget savings options approved by the Council a number of employees have had their redundancy application accepted. Redundancy costs have been incurred by the Council since the 2010-11 financial year in relation to the budget savings agreed. In each year, provision was made within the financial year for the costs of all employees who had accepted redundancy or where redundancy was probable as at 31 March ending that year, including accounting for costs for employees who confirmed redundancy by 31 March but left or were leaving after this date. Termination costs for all Council employees who have accepted redundancy by 31 March 2023 are recognised in the Exit Packages note in 2022-23, or in previous financial years. The total cost recognised in the Exit Packages note in 2022-23 is £0.622m for 10 employees and in 2021-22 was £0.308m for 6 employees. These costs are detailed further in the Remuneration Report on page 41.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 117 The reduction in the staffing establishment includes posts from all services across the Council and reductions were in line with the savings agreed by the Council. There will be further redundancy costs incurred as the Council is required to make further savings to balance the budget in future years and the council have earmarked monies from the loans fund one-off reprofiling gain. 36 TRUST FUNDS AND OTHER THIRD PARTY FUNDS The Council acts as sole or custodian trustee for 57 trust funds. The funds do not represent assets of the Council, and as such have not been included in the Balance Sheet. Funds for which the Council act as sole trustee: Income Expenditure Net Assets Reserves £'000 £'000 £'000 £'000 17 17 658 658 1 3 68 68 30 29 1,089 1,089 10 16 458 458 Total Trust Funds 58 65 2,273 2,273 Argyll Education Trust GM Duncan Trust MacDougall Trust Various Other Trust Funds Argyll Education Trust: this is made up of a number of small trusts to award prizes, bursaries, etc. to pupils and ex-pupils of schools within the former Argyll County Council area. GM Duncan Trust: for the provision of fuel, clothing and foodstuffs for the needy of Campbeltown. MacDougall Trust: for the provision of sheltered housing on the Ross of Mull. Further information on the Trust Funds, administered by the Council, can be obtained from Financial Services within the Chief Executive’s Unit. A number of the trust funds administered by the Council are charitable trusts and as such are required to comply with current Office of the Scottish Charities Regulator (OSCR) financial reporting requirements. Arrangements have been put in place to ensure that all charities administered by the Council comply and will continue to comply with these requirements. 37 COMMON GOOD FUNDS The Council administers the Common Good Accounts for the former Burghs of Oban, Campbeltown, Rothesay, Dunoon, Lochgilphead, Inveraray, Cove and Kilcreggan. The figures below summarise the aggregate income and expenditure for the year as well as providing a snapshot picture of the assets and liabilities at 31 March 2023. The Common Good Funds are for the benefit of the geographical areas of the former burghs. Further information on the Common Good Funds can be obtained from Financial Services within the Chief Executive’s Unit.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 118 37.1 Common Good Income and Expenditure Account for the year ended 31 March 2023 Oban Common Good Other Common Goods Total Common Good Oban Common Good Other Common Goods Total Common Good £'000 £'000 £'000 £'000 £'000 £'000 160 39 199 Expenditure 258 74 332 (217) (134) (351) Income (57) (42) (99) (57) (95) (152) (Surplus)/Deficit for the Year 201 32 233 2021-22 2022-23
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 119 37.2 Common Good Balance Sheet at 31 March 2023 Oban Common Good Other Common Goods Total Common Good Oban Common Good Other Common Goods Total Common Good £'000 £'000 £'000 £'000 £'000 £'000 5,858 319 6,177 Tangible Fixed Assets 5,711 319 6,030 2,014 1,193 3,207 Investments 1,939 1,148 3,087 153 169 322 Current Assets 147 183 330 (42) - (42) Current Liabilities (15) - (15) 7,983 1,681 9,664 Total Assets less Liabilities 7,782 1,650 9,432 5,858 323 6,181 Revaluation Reserve 5,711 323 6,034 2,125 1,358 3,483 Common Good Fund 2,071 1,327 3,398 7,983 1,681 9,664 Total Net Worth 7,782 1,650 9,432 2021-22 2022-23 38 TAX INCREMENTAL FINANCING (TIF) PROJECTS The Council entered into an agreement with the Scottish Government in May 2014 in respect of the Lorn Arc Tax Incremental Finance (TIF) scheme. This agreement essentially allows for the repayment of debt arising from infrastructure investment from incremental Non-Domestic Rates (NDR) revenue. The assets to be funded by the TIF project largely comprise public realm and infrastructure improvements within the Lorn Arc area of Oban. The project is for 25 years, with the first material capital investment incurred during the financial year ended 31 March 2015. During the TIF project period, the Council is entitled to retain the TIF revenue from its NDR revenue, a pro-rata amount of NDR equal to the amount (if any) by which the collected amount exceeds the collectable amount. The Council is required to apply 100% of the TIF revenue towards repayment of the TIF debt. If all projects are delivered and debt is fully paid, the Council can retain 50% of the TIF revenue for further infrastructure investment until the end of the TIF period. Net capital expenditure incurred in the year to 31 March 2023, to be funded from borrowing, in respect of TIF assets totalled £0.023m (2021-22 £0.049m). This is reflected in the “Summary of Capital Expenditure and Financing” outlined within note 14.4. The total TIF debt to be repaid over the project period, in respect of investment to 31 March 2023, has been calculated in accordance with finance circular No. 4/2014 at £1.011m (2021-22 £0.987m). There is a retention of £0.623m of TIF income during 2022-23 (2021-22 £0.336m) to repay the notional borrowing for TIF. Principal sums accumulated by 2022-23 amount to £0.137m (2021-22 £0.137m) and cumulative interest £0.117m (2021-22 £0.117m) resulting in a net cumulative surplus of £1.749m (2021- 22 £1.103m) which will be used to pay down TIF debt per the TIF agreement and the balance of £0.875m will be placed in earmarked reserves to be used in future years to repay debt costs.
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 120 39 CASH FLOW STATEMENT – OPERATING ACTIVITIES The Net Cash Flows for Operating Activities can be reconciled to the Net (Surplus)/Deficit on the Provision of Services as follows: 2021-22 2022-23 £'000 £'000 (15,016) Net (Surplus)/Deficit on Provision of Services 5,994 (3,379) Statutory Adjustments through Statement of Movement in Reserves 3,337 553 Transfer to/from Other Statutory Reserves 322 (58) Increase/(Decrease) in Inventories 288 (2,487) Increase/(Decrease) in Debtors 13,249 3,312 (Increase)/Decrease in Creditors and Provisions (6,437) (4,593) Other Revenue Adjustments (25,111) (6,652) (14,352) 12,772 Non Cash Capital 11,071 (4,844) Capital Element of Finance Lease Payments (5,116) 7,928 5,955 (13,740) Net Cash Flows from Operating Activities (2,403) 7,074 Interest Paid on Borrowings 6,742 4,844 Interest Paid on Finance Leases 8,887 (241) Interest Received on Bank Deposits (748) 11,677 Net Cash Outflow from Servicing of Finance 14,881 Adjustments to Net (Surplus)/Deficit on the Provision of Service for Non Cash Movements: Adjustments for items included in the Net (Surplus)/Deficit on the Provision of Services that are Investing and Financing Activities: The cash flows for Operating Activities include the following items: 40 CASH FLOW STATEMENT – INVESTING ACTIVITIES The cash flows for Investing Activities include the following items: 2021-22 2022-23 £'000 £'000 30,203 25,659 20,000 (17,500) (815) (568) (17,345) (21,914) 32,043 Net Cash Outflow from Investing Activities (14,323) Purchase of Property, Plant and Equipment, Investment Property and Intangible and Heritage Assets Proceeds from the Sale of Property, Plant and Equipment and Investment Property Other Receipts from Investing Activities Investments made/(disposed of) during year
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Notes to the Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 121 41 CASH FLOW STATEMENT – FINANCING ACTIVITIES The cash flows for Financing Activities include the following items: 2021-22 2022-23 £'000 £'000 (10,184) (35,228) 1,892 2,021 4,844 5,116 1,055 70,627 (2,393) Net Cash (Inflow)/Outflow from Financing Activities 42,536 Cash Payments for the Reduction of the Outstanding Liabilities relating to Finance Leases and on Balance Sheet PFI Contracts Other Receipts from Financing Activities Repayments of Short and Long Term Borrowing Cash Receipts of Short and Long Term Borrowing
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Council Tax Income Account www.argyll-bute.gov.uk __________________________________________ Page 122 The Council Tax Income Account shows the gross income raised from council tax levied and deductions made under the Local Government Finance Act 1992. The resultant net income is transferred to the Comprehensive Income and Expenditure Statement of the Council. 2021-22 2022-23 Actual Actual £'000 £'000 71,280 Gross Council Tax Levied and Contributions in Lieu excluding RSL Second Home Additional Income 72,340 Less: (14,516) Other Discounts and Reductions (13,269) Cost of living contribution (grant funded) (4,300) (1,358) Provision for Bad and Doubtful Debts (1,411) 55,406 Total 53,360 836 Adjustment to Previous Years' Community Charge and Council Tax 540 56,242 Transfers to General Fund 53,900
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Notes to the Council Tax Income Account www.argyll-bute.gov.uk __________________________________________ Page 123 1. CALCULATION OF THE COUNCIL TAX Dwellings are valued by the Assessor and placed within a valuation band ranging from the lowest “A” to the highest “H”. The Council Tax charge is calculated using the Council Tax Base, Band D equivalent as below. This value is then decreased or increased dependent upon the band of the dwelling. The charge for each band for 2022-23 was as follows: Band Valuation Band £ per year A Up to £27,000 939.17 B £27,001 - £35,000 1,095.70 C £35,001 - £45,000 1,252.23 D £45,001 - £58,000 1,408.76 E £58,001 - £80,000 1,850.95 F £80,001 - £106,000 2,289.24 G £106,001 - £212,000 2,758.82 H Over £212,000 3,451.46 6/9 7/9 8/9 9/9 473/360 585/360 705/360 882/360 Ratio Band D 2. CALCULATION OF THE COUNCIL TAX BASE 2022-23 Council Tax Base A B C D E F G H Total Total Number of Properties 7,456 10,072 9,522 6,322 7,715 4,441 3,003 255 48,786 Less - 983 768 892 489 605 238 159 50 4,182 - 888 1,093 794 472 443 218 114 6 4,028 Effective Number of Properties 5,585 8,212 7,837 5,361 6,667 3,986 2,730 199 40,576 Band D Equivalent Factor (ratio) 67% 78% 89% 100% 131% 163% 196% 245% 3,724 6,387 6,966 5,361 8,760 6,477 5,347 488 43,510 Add Contribution in lieu in respect of Class 18 dwellings (Band D Equivalent) 521 Nominal Tax Yield 44,031 Less Provision for Council Tax Reduction Scheme 9.0% 3,981 Council Tax Base 2022-23 - Number of Band D equivalents 40,050 Exemptions / Deductions Adjustment for Single Chargepayers Band D Equivalent Number of Properties
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Non Domestic Rate Income Account www.argyll-bute.gov.uk __________________________________________ Page 124 The Non-Domestic Rate Income Account is an agent’s statement that reflects the statutory obligation for billing authorities to maintain a separate Non-Domestic Rate Account. The statement shows the gross income from the rates and deductions made under the Local Government (Scotland) Act 1975 as amended by the Local Government Finance Act 1992 on non-domestic property. The net income is paid to the Scottish Government as a contribution to the national non-domestic rate pool. 2021-22 2022-23 Actual Actual £'000 £'000 55,736 Gross rates levied and Contributions in Lieu 56,489 Less: (25,366) Reliefs and other deductions (17,430) - Payment of Interest - (304) Write-off of Uncollectable Debts and Allowance for Impairment (391) 30,066 Total Net Non-Domestic Rate Income 38,668 (4,024) Adjustments for prior years (3,487) - Business Rate Incentivisation Scheme (BRIS) NDR Income Retained - (336) Tax Incremental Finance (TIF) Scheme NDR Income Retained (647) 25,706 Contribution to National Non-Domestic Rate Pool 34,534 (636) Difference between Distributable and Contributable NDR Income amounts (1,355) 25,070 Distribution from Non-Domestic Rate Pool credited to Comprehensive Income and Expenditure Statement 33,179
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Notes to the Non Domestic Rate Income Account www.argyll-bute.gov.uk __________________________________________ Page 125 1. ANALYSIS OF RATEABLE VALUES 2021-22 2022-23 £ £ 9,355,020 Industrial and freight transport subjects 9,490,265 75,263,110 Miscellaneous including Telecomms, Rail, Gas and Electricity Companies 74,472,465 Commercial subjects: 13,964,305 Shops 13,921,035 5,871,270 Offices 5,773,370 9,503,760 Hotels, Boarding Houses etc. 8,818,450 1,921,820 Others 1,916,145 115,879,285 Total Rateable Value 114,391,730 2. NON-DOMESTIC RATE CHARGE 2021-22 2022-23 Pence Pence 49.0p Rate Per Pound 49.8p 1.3p Supplementary Rate Per Pound for Properties between £51,000 and £95,000 1.3p 2.6p Supplementary Rate Per Pound for Properties over £95,000 2.6p 3. CALCULATION OF RATE CHARGE FOR EACH PROPERTY The rates charge for each subject is determined by the rateable value placed upon it by the Assessor multiplied by the Rate per £ announced each year by the Government.
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Group Accounts - Introduction www.argyll-bute.gov.uk __________________________________________ Page 126 INTRODUCTION The Code of Practice on Local Authority Accounting in the United Kingdom 2022-23: Based on International Financial Reporting Standards, places a requirement on Councils to consider all their interests in external organisations including limited companies and other statutory bodies. Where the interest is considered to be material, the Council is required to prepare a full set of group accounts in addition to those prepared for Argyll and Bute Council. The Group Accounts are designed to show “a true and fair view” of the financial performance and position of the Council’s Group. THE GROUP ACCOUNTS The Group Accounts comprise the following financial statements: Group Statement of Comprehensive Income and Expenditure: this statement shows the accounting cost in the year of providing the Council’s services and its share of the results of its associates in accordance with International Financial Reporting Standards, rather than the amount to be funded from taxation. Local authorities raise taxation to cover expenditure in accordance with regulations, and this is different from the accounting cost. The taxation position is shown in the Statement of Movement in Reserves. Group Balance Sheet: The Balance Sheet is a snapshot of the value at the 31 March 2023 of the assets and liabilities recognised by the Council and its share of the net assets or liabilities of its associates and Common Good funds. The net assets of the Council (assets less liabilities) are matched by the reserves held by the Council. The net investment or liability in its associates is matched by its share of the reserves of the associates (i.e. its group reserves). Group Statement of Movement in Reserves: this statement shows the movement in the year on the reserves held by the Council plus its share of the reserves of its associates. The Common Good reserves are also fully consolidated into the Group Accounts. The Council’s reserves are analysed into those which are “Usable Reserves” (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The Council’s share of the reserves of Associates is an unusable reserve (i.e. it cannot be used to fund expenditure or reduce taxation). The Council’s Statement of Movement in Reserves gives a more detailed analysis of the movement in the Council’s usable and unusable reserves during 2022-23. Group Cash Flow Statement: The Cash Flow Statement shows the changes in cash and cash equivalents of the Council and its associates Common Good Funds. The statement shows how the Group generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amounts of net cash flow arising from operating activities is a key indicator of the extent to which the operations of the Group are funded by way of taxation and grant income or from the recipients of services provided by the Group. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the Group’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the Group.
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www.argyll-bute.gov.uk __________________________________________ Page 127 Group Statement of Comprehensive Income and Expenditure Gross Expenditure Gross Income Net Expenditure Gross Expenditure Gross Income Net Expenditure £'000 £'000 £'000 Service £'000 £'000 £'000 25,714 18,837 6,877 Chief Executive and Financial Services 26,810 18,209 8,601 129,856 25,189 104,667 Executive Director - Douglas Hendry 155,620 20,429 135,191 105,485 34,846 70,639 Executive Director - Kirsty Flanagan 114,590 44,631 69,959 158,106 88,788 69,318 Health and Social Care Integration 174,434 94,948 79,486 10,718 251 10,467 Other Non-Departmental Costs 10,163 2,291 7,872 2,125 9,390 (7,265) Associates and Joint Ventures Accounted for on an Equity Basis 2,107 (230) 2,337 432,004 177,301 254,703 Net Cost of Services 483,724 180,278 303,446 Other Operating Income and Expenditure: (103) Net (Gain)/loss on Disposal of Fixed Assets (437) 1,836 Other Operating Income and Expenditure 1,643 1,733 Total Other Operating Income and Expenditure 1,206 Financing and Investment Income and Expenditure: 15,993 Interest Payable and Similar charges 10,416 (805) Interest and Investment Income (2,966) 1,864 Net Pension Interest Expense 141 17,052 Total Financing and Investment Income and Expenditure 7,591 Taxation and Non-Specific Grant Income: (191,432) General Government Grants (191,775) (21,700) Government Capital Grants and Other Capital Contributions (22,549) (25,406) Non-domestic Rates Redistribution and Retained Non-domestic Rates (TIF & BRIS) (33,826) (56,242) Council Tax Income (53,900) (294,780) Total Taxation and Non-Specific Grant Income (302,050) (21,292) (Surplus)/Deficit on Provision of Services 10,193 (27,995) (Surplus)/Deficit on revaluation of Fixed Assets (21,104) (113,865) Other Post Employment Benefits (Pensions) (257,130) (2,111) Share of Other Comprehensive Income and Expenditure of Associates and Common Good Funds (3,319) (143,971) Other Comprehensive Income and Expenditure (281,553) (165,263) Total Comprehensive Income and Expenditure (271,360) 2021-22 2022-23
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Group Balance Sheet www.argyll-bute.gov.uk __________________________________________ Page 129 £'000 £'000 £'000 £'000 Long Term Assets Property Plant & Equipment 414,852 - Other Land and Buildings 451,017 11,798 - Vehicles, Plant, Furniture and Equipment 10,872 230,478 - Infrastructure Assets 235,076 13,631 - Community Assets 14,922 1,408 - Surplus Assets 3,286 35,344 - Assets Under Construction 21,440 707,511 Total Property Plant & Equipment 736,613 2,099 Heritage Assets 2,345 604 Intangible Assets 733 2,428 Investment Property 2,553 5,792 Long-Term Debtors 5,880 3,699 Long-Term Investments 8,579 1,084 Other Long-Term Debtors (Pensions) 236,985 4,521 Investment in Associates and Joint Ventures 7,790 727,738 Total Long Term Assets 1,001,478 Current Assets 863 Inventories 1,145 18,382 Short Term Debtors (Net of Impairment) 34,150 1,509 Assets Held for Sale 1,554 82,500 Short Term Investments 60,000 22,535 Cash and Cash Equivalents (3,626) 13,161 Investment in Associates and Joint Ventures 10,950 138,950 Total Current Assets 104,173 Current Liabilities (17,745) Short-term Borrowing (11,676) (42,034) Short-term Creditors (50,659) (2,231) Provisions (1,450) (5,117) Other Short Term Liabilities (5,280) (281) Liabilities in Associates and Joint Ventures (357) (67,408) Total Current Liabilities (69,422) Long-term Liabilities (161,657) Borrowing Repayable within a Period in Excess of 12 Months (132,155) (112,313) Other Long-term liabilities (107,033) (2,079) Provisions (2,444) - Capital Grant Receipts in Advance - - Other Long-term liabilities (Pensions) - - Liabilities in Associates and Joint Ventures - (276,049) Total Long-term Liabilities (241,632) 523,231 Total Assets less Liabilities 794,597 31 March 202331 March 2022
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Group Balance Sheet www.argyll-bute.gov.uk __________________________________________ Page 130 £'000 £'000 £'000 £'000 Unusable Reserves 157,645 - Revaluation Reserve 174,952 241,327 - Capital Adjustment Account 268,770 (2,198) - Financial Instruments Adjustment Account (1,871) 1,084 - Pensions Reserve 236,985 (6,928) - Accumulated Absences Account (7,588) 390,930 671,248 Usable Reserves 4,414 - Capital Funds 4,503 2,682 - Repairs and Renewals Funds 2,916 96,087 - General Fund Balance 86,428 103,183 93,847 19,456 Group Reserves 20,071 9,662 Common Good Reserves 9,431 523,231 Total Reserves 794,597 31 March 202331 March 2022 The Unaudited Annual Accounts were issued on 29 June 2023. Kirsty Flanagan Section 95 Officer 29 June 2023
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Group Statement of Movement in Reserves www.argyll-bute.gov.uk __________________________________________ Page 131 Movements in 2022-23 General Fund Balance Repairs and Renewals Fund Capital Funds Total Usable Reserves Total Unusable Reserves Total Reserves of the Council Total Live Argyll Reserves Usable Total Live Argyll Reserves Unusable £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 March 2022 (96,081) (2,682) (4,414) (103,177) (394,483) (497,660) (17,401) (2,055) 3,551 (9,664) (523,229) (Surplus)/Deficit on Provision of Services 5,994 - - 5,994 - 5,994 2,337 1,625 - 233 10,189 Other Comprehensive Income and Expenditure - - - - (268,513) (268,513) (3,319) (9,721) - - (281,553) Total Comprehensive Income and Expenditure 5,994 - - 5,994 (268,513) (262,519) (982) (8,096) - 233 (271,364) Total Statutory Adjustments (See Page 53 to 54) 6,960 - (568) 6,392 (6,392) - 8,463 (8,463) - - Net (Increase)/Decrease before Transfers to Other Statutory Reserves 12,954 - (568) 12,386 (274,905) (262,519) (982) 367 (8,463) 233 (271,364) Transfer to/from Other Statutory Reserves 322 (234) 480 568 (568) - - - - - - Adjustments permitted by Accounting Standards (3,623) - - (3,623) 3,623 - - (Increase)/Decrease in Year 9,653 (234) (88) 9,331 (271,850) (262,519) (982) 367 (8,463) 233 (271,364) Balance at 31 March 2023 Carried Forward (86,428) (2,916) (4,503) (93,847) (666,336) (760,183) (18,383) (1,688) (4,912) (9,431) (794,597) Council's Share of Reserves of Associates Total Common Good Reserves Total Reserves Other Transfers required by Statute Argyll and Bute Council Usable Reserves
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Group Statement of Movement in Reserves www.argyll-bute.gov.uk __________________________________________ Page 132 Comparative Movements in 2021-22 General Fund Balance Repairs and Renewals Fund Capital Funds Total Usable Reserves Total Unusable Reserves Total Reserves of the Council £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 March 2021 (78,245) (2,134) (4,406) (84,785) (260,585) (345,370) (8,024) (1,836) 5,389 (8,129) (357,970) Surplus/(Deficit) on Provision of Services (15,016) - - (15,016) - (15,016) (7,265) 1,159 - (170) (21,292) Other Comprehensive Expenditure and Income - - - - (137,279) (137,280) (2,111) (3,217) - (1,364) (143,972) Total Comprehensive Expenditure and Income (15,016) - - (15,016) (137,279) (152,296) (9,376) (2,058) - (1,534) (165,263) Total Statutory Adjustments (See Page 55 to 56) 367 - (815) (448) 448 - - 1,839 (1,839) - - Net (Increase)/Decrease before Transfers to Other Statutory Reserves (14,649) - (815) (15,464) (136,831) (152,296) (9,376) (219) (1,839) (1,534) (165,263) Transfer to/from Other Statutory Reserves 553 (548) 807 812 (810) - - - - - 2 Adjustments permitted by Accounting Standards (3,746) (3,746) 3,746 (Increase)/Decrease in Year (17,842) (548) (8) (18,398) (133,895) (152,296) (9,376) (219) (1,839) (1,534) (165,261) Balance at 31 March 2022 Carried Forward (96,087) (2,682) (4,414) (103,183) (394,480) (497,666) (17,400) (2,055) 3,550 (9,663) (523,231) Other Transfers Total Common Good Reserves Total Reserves Other Transfers required by Statute Argyll and Bute Council Usable Reserves Council's Share of Reserves of Associates Total Live Argyll Reserves Usable Total Live Argyll Reserves Unusable
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Group Cash Flow Statement www.argyll-bute.gov.uk __________________________________________ Page 134 2021-22 2022-23 £'000 Group Note £'000 (21,292) Net Deficit on the Provision of Services 10,193 (10,436) Adjustments to net surplus or deficit on the provision of services for non-cash movements (19,013) 8,155 Adjustments for items included in the net surplus or deficit on the provision of services that are investing and financing activities 5,809 (23,573) Net Cash OutFlow from Operating Activities 8 (3,011) 41,442 Investing Activities 9 (13,364) (2,393) Financing Activities 10 42,536 15,476 Net (Increase)/Decrease in Cash and Cash Equivalents 26,161 (38,011) Cash and Cash Equivalents at the beginning of the Reporting Period (22,535) (22,535) Cash and Cash Equivalents at the end of the Reporting Period 3,626
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Notes to the Group Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 135 1. GROUP ACCOUNTING POLICIES The group accounts are prepared in accordance with the policies set out in Note 1 to the Financial Statements. The Strathclyde Partnership for Transport and Strathclyde Concessionary Travel Scheme Joint Committee financial statements have been prepared under the historic cost convention. 2. COMBINING ENTITIES The Council has an interest in a number of Associate Entities. For the purposes of consolidation and incorporation within the Group Accounts recognition has been made of the Council’s significant influence over Joint Boards and other entities. The Associates which have been incorporated are: • Dunbartonshire and Argyll & Bute Valuation Joint Board • Strathclyde Partnership for Transport • Strathclyde Concessionary Travel Scheme Joint Committee Under accounting standards, the Council is required to include the results of the above organisations as “associates” because it has “significant influence” over their financial and operating policies. The Council has no shares in or ownership of any of these organisations which are entirely independent of the Council under law and for taxation. Two of the three Joint Boards (SPT and Concessionary Travel) are included within the Group Accounts under the wider definition of an “associate” although the Council holds less than 20% of voting rights that is normally presumed to confer significant influence. This is in view of the funding arrangements between the constituent Councils and the Joint Boards. Live Argyll is a wholly owned subsidiary of Argyll and Bute Council and is consolidated within the group accounts on a line by line basis. The accounting period for all entities is 31 March 2023. 3. NON MATERIAL INTEREST IN OTHER ENTITIES The Council has an interest in Scotland Excel. Scotland Excel took up the activities of the Authorities Buying Consortium and similar bodies across the Scottish Local Authority sector on 1 April 2008. Renfrewshire Council prepare the financial statements for Scotland Excel in its role as lead authority. Scotland Excel is a not-for-profit organisation funded mainly by the 32 participating Scottish Local Authorities. The Council contributed £0.073m towards Scotland Excel in the 2022-23 financial year. The Council also has an interest in the Highlands and Islands Transport Partnership (HITRANS). The Partnership was established as one of the seven Scottish Regional Transport Partnerships. The Transport (Scotland) Act 2005 requires these Partnerships to prepare Transport Strategies for their regions which will enhance economic well-being; promote safety; social inclusion and equal opportunity; plan for a sustainable transport system; and integrate across boundaries with other partnerships. The Council has an interest in 57 Trust Funds where it acts as sole or custodian trustee. The funds do not represent assets of the Council. These entities are part of the Council’s group for the purposes of Group Accounts. As such it is recognised that the nature of the relationship with these bodies should be included within these notes. However, it has been decided that the Council’s share of the net worth of these entities is not material to a fair understanding of the financial position of the Council, and so they have not been consolidated into the Group Accounts. The Council inherited its interest in these entities following the reorganisation of local government in 1996.
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Notes to the Group Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 136 4. ARGYLL AND BUTE INTEGRATION JOINT BOARD The Argyll and Bute Integration Joint Board was established as a body corporate by order of Scottish Ministers on 27 June 2015. The partnership between the Council and NHS Highland has been established in accordance with the provisions of the Public Bodies (Joint Working)(Scotland) Act 2014 and associated Regulations. The Integration Joint Board has responsibility for all health and social care functions relating to adults and children and will oversee the Strategic Planning and budgeting of these, together with corresponding service delivery for the residents of Argyll and Bute. The Council contributed £74.391m towards the Argyll and Bute Integration Joint Board in the 2022-23 financial year. The Council and NHS Highland are required to treat the IJB as a Joint Venture in their annual accounts and recognise a share of the overall surplus or deficit of the IJB for the year. 5. FINANCIAL IMPACT OF CONSOLIDATION The effect of inclusion of the Associates, Joint Ventures, Subsidiaries and Common Good Funds on the Group Balance Sheet is to increase both reserves and net worth by £34.414m. This gives an overall net asset position for the Group of £769.534m. All associates and subsidiaries have prepared their accounts on a ‘going concern’ basis. For Strathclyde Partnership for Transport and the Joint Valuation Board funding arrangements between the Scottish Government and constituent authorities remains assured. In common with these public bodies, the Council’s Group Accounts have been prepared on a ‘going concern’ basis as there is no reason to suggest that future funding will not continue. 6. FURTHER DETAILS ON CONSOLIDATION Strathclyde Partnership for Transport Strathclyde Partnership for Transport was formed on 1 April 2006 as the successor to the Strathclyde Passenger Transport Authority. It is a Joint Committee of all Councils in the West of Scotland plus Dumfries and Galloway Council. In association with the related Structure Planning Committees, the Partnership’s remit included the promotion of joint working to set out the policy framework for achieving the most effective management, development and integration of the transport network across boundaries in the medium to longer term through the Joint Transport Strategy. The Council contributed £0.405m or 1.14% of the Board’s estimated net running costs during 2022-23 and accounted for £5.392m of the Balance Sheet Assets within the Group Balance Sheet. The accounts of the Board are subject to independent audit and are available from the Treasurer to Strathclyde Partnership for Transport, Consort House, 12 West George Street, Glasgow G2 1HN. Strathclyde Concessionary Travel Scheme Joint Board This body comprises the 12 local authorities within the West of Scotland which oversees the operations of the concessionary fares scheme for public transport within its area. The costs of the scheme are met by a combination of funding from the 12 constituent councils and direct grant funding from the Scottish Government. During 2022-23 the Council contributed £0.204m or 5.02% of the net annual running costs and accounted for £0.252m of the Balance Sheet Assets within the Group Balance Sheet. The accounts of the Board are subject to independent audit and are available from the Treasurer to Strathclyde Concessionary Travel Scheme, Consort House, 12 West George Street, Glasgow G2 1HN. Live Argyll Live Argyll was established by Argyll and Bute Council and is limited by guarantee and was fully incorporated and commenced trading on 2 October 2017. The Trust is a charitable company registered in Scotland and provides a wide range of services within the Argyll and Bute area including libraries, leisure facilities, halls, sports development and community centres the assets of which are owned by the Council. During 2022-23 Argyll and Bute Council paid £4.075m in the form of a Management Fee to Live Argyll and increased the overall net worth of the Group Balance Sheet by £6.6m. The board is made up of 3 independent board members, 3 Councillors and a Trade Union representative.
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Notes to the Group Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 137 Dunbartonshire and Argyll and Bute Valuation Joint Board This body was formed in October 1995 at Local Government reorganisation by a Statutory Instrument and is responsible for the maintenance of the electoral, council tax and non-domestic rates registers for Argyll and Bute, West Dunbartonshire and East Dunbartonshire Councils. The Board’s running costs are met by the three Councils. During 2022-23 Argyll and Bute Council contributed £1.264m towards estimated running costs and accounted for £0.046m of Balance Sheet Liabilities within the Group Balance Sheet. The accounts of the Board are subject to independent audit and will be available from the Valuation Joint Board’s website www.saa.gov.uk /dab-vjb/ and West Dunbartonshire Council’s website https://www.west-dunbarton.gov.uk/council/performance-and-spending/service- performance/financial-performance/ from 1 July 2023. The following disclosures are also required for Dunbartonshire and Argyll and Bute Valuation Joint Board because the Council’s interest exceeds the 25% threshold for accounting purposes:- 2021-22 2022-23 £'m £'m Argyll and Bute Council has a 44.34% share of: 2.958 Gross Income 2.851 0.245 Net (Surplus)/Deficit 0.456 0.674 Long Term Assets 0.668 0.994 Current Assets 0.972 (0.065) Liabilities due within one year (0.104) - Liabilities due over one year (0.507) Pension Asset/(Liability) 8.032 (2.110) Capital and Revenue Reserves 9.568 7. REPORTING AUTHORITY ADJUSTMENTS A number of adjustments are required to the Council’s Statement of Comprehensive Income and Expenditure (pages 52 to 53) for group accounting purposes. These can be summarised as follows: • All intra-group transactions have been removed from the Group Accounts as part of the subsidiary consolidation process. • The Common Good Funds described in note 37 of the Notes to the Financial Statements on pages 122 to 123 have been fully consolidated into the Group Accounts. This adjustment increases the net assets and reserves of Argyll and Bute Council’s Group by £9.431m.
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Notes to the Group Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 138 8. GROUP CASH FLOW STATEMENT – OPERATING ACTIVITIES 2021-22 2022-23 £'000 £'000 (21,292) Net (Surplus)/Deficit on Provision of Services 10,193 (1,540) Statutory Adjustments through Statement of Movement in Reserves 11,802 553 Transfer to/from Other Statutory Reserves 322 (5,309) Transfer Group Other Comprehensive Income and Expenditure (13,043) (45) Increase/(Decrease) in Inventories 282 (2,463) Increase/(Decrease) in Debtors 13,200 3,056 (Increase)/Decrease in Creditors and Provisions (6,367) (4,688) Other Revenue Adjustments (25,209) (10,436) (19,013) 12,999 Non Cash Capital 10,925 (4,844) Capital Element of Finance Lease Payments (5,116) 8,155 5,809 (23,573) Net Cash Flows from Operating Activities (3,011) 7,074 Interest Paid on Borrowings 6,742 4,844 Interest Paid on Finance Leases 8,887 (241) Interest Received on Bank Deposits (748) 11,677 Net Cash Outflow from Servicing of Finance 14,881 Adjustments to Net (Surplus)/Deficit on the Provision of Service for Non Cash Movements: Adjustments for items included in the Net (Surplus)/Deficit on the Provision of Services that are Investing and Financing Activities: The cash flows for Operating Activities include the following items: 9. GROUP CASH FLOW STATEMENT – INVESTING ACTIVITIES 2021-22 2022-23 £'000 £'000 30,244 25,636 20,000 (17,500) (815) (568) 9,358 982 (17,345) (21,914) 41,442 Net Cash Outflow from Investing Activities (13,364) Investments made/(disposed of) during year Purchase of Property, Plant and Equipment, Investment Property and Intangible and Heritage Assets Net Receipts from Investment in Associates and Joint Ventures Proceeds from the Sale of Property, Plant and Equipment and Investment Property Other Receipts from Investing Activities
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Notes to the Group Financial Statements www.argyll-bute.gov.uk __________________________________________ Page 139 10. GROUP CASH FLOW STATEMENT – FINANCING ACTIVITIES 2021-22 2022-23 £'000 £'000 (10,184) (35,228) 1,892 2,021 4,844 5,116 1,055 70,627 - - (2,393) Net Cash (Inflow)/Outflow from Financing Activities 42,536 Other Payments from Financing Activities Cash Receipts of Short and Long Term Borrowing Other Receipts from Financing Activities Cash Payments for the Reduction of the Outstanding Liabilities relating to Finance Leases and on Balance Sheet PFI Contracts Repayments of Short and Long Term Borrowing
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Glossary of Terms www.argyll-bute.gov.uk __________________________________________ Page 141 Existing Use Value. The market value of a particular Council property, less the difference between the average rental income between public and private sector properties. Expected Rate of Return on Pension Assets. The average rate of return, including both income and changes in fair value but net of scheme expenses, expected over the remaining life of the related obligation on the actual assets held by the Scheme. Fair Value. This is the price at which an asset could be exchanged in an arm’s length transaction less any grants receivable towards the purchase or use of the asset. Financial Asset. A right to future economic benefits controlled by the Council that is represented by cash, an equity instrument of another entity, a contractual right to receive cash from another entity or a financial right to exchange financial instruments under conditions that are potentially favourable to the Council. Financial Instrument. Any contract that gives rise to a financial asset of one entity and financial liability or equity instrument of another. Financial Instruments Adjustment Account. This holds the accumulated difference between the financing costs included in the Income and Expenditure Account and the accumulated financing costs required in accordance with regulations to be charged to the General Fund Balance. Financial Liability. An obligation to transfer economic benefits controlled by the Council that is represented by a contractual obligation to deliver cash or another financial asset to another entity or a contractual obligation to exchange financial instruments under conditions which are potentially unfavourable to the Council. Financial Reporting Standard (FRS). Financial Reporting Standards are issued by the Accounting Standard Board and define proper accounting practice for a given transaction or event. Fixed Assets. Tangible assets that yield benefits to the Council and the services it provides for a period of more than one year. Gains/losses on settlements and curtailments. The result of actions to relieve the Council of liabilities or events that reduce the expected future service or accrual of benefits of employees. This is charged or credited to Non Distributed costs in the Comprehensive Income and Expenditure Statement. General Fund Balance. This contains the net surplus on the provision of Council services combined with any balances from previous years and any contributions to other funds or reserves made during the year. Group Accounts. The purpose of group accounts is to show the Council’s interest in organisations and companies within the Financial Statements. The Council’s shares of the assets and liabilities of these other entities are shown in the Group Movement in Reserves Statement, Comprehensive Income and Expenditure Statement and Group Balance Sheet. Government Grants. Assistance by government and inter- government agencies and similar bodies, whether local, national or international, in the form of cash or transfers of assets to an authority in return for past, or future, compliance with certain conditions relating to the activities of the Council. Heritage Assets. Assets which are intended to be preserved in trust for future generations because of their cultural, environmental and historical associations and are held by the Council of the maintenance of heritage. International Accounting Standards (IAS). International Accounting Standards are issued by the International Accounting Standards Board and define proper accounting practice for a given transaction or event. IAS’s take precedence over other accounting standards in the hierarchy of technical accounting standards. International Public Sector Accounting Standards (IPSAS), a set of accounting standards issued by the IPSAS Board for use by public sector entities around the world in the preparation of financial statements. Impairment. A reduction in the value of fixed or financial asset below the valuation held on the balance sheet. Infrastructure Assets. Fixed assets that are inalienable, expenditure on which is recoverable only by continued use of the asset created. Examples of infrastructure assets are highways and footpaths. Intangible Assets. Non-financial assets which do not have physical substance but are identifiable and are controlled by the Council. Interest Cost (Pensions). The expected increase during the period in the present value of the scheme liabilities because the benefits are one period closer to settlement. Inventories. Inventories may comprise the following: goods or other assets purchased for re-sale; consumable stores; raw materials and components purchased for incorporation into products for sale; products and services in intermediate stages of completion; long term contract balances; and finished goods. Liquid Resources. Current asset investments that are readily disposable by the Council without disrupting its business and are either readily convertible to known amounts of cash at or close to the carrying amount, or traded on the active market.
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Glossary of Terms www.argyll-bute.gov.uk __________________________________________ Page 142 Materiality. Information is included where the information is of such significance as to justify its inclusion, and omission or misstatement could, individually or collectively, influence the decisions or assessments of users made on the basis of the financial statements. National Non-Domestic Rates Pool. All non-domestic rates collected by Council’s are remitted to the national pool and, thereafter, distributed to Councils by the Scottish Government. Net Book Value. The amount at which fixed assets are included in the Balance Sheet, i.e. their historical cost or current value less cumulative amounts provided for depreciation. Net Realisable Value. The open market value of the asset in its existing use, or open market value in the case of non- operational assets, less the expenses to be incurred in realising the asset. Non-Current Assets. Non-current assets are not expected to be realised within 12 months and are held to provide future economic benefits to the Council. Non-operational assets. Are assets held by the Council but not directly occupied, used or consumed in the delivery of services. Examples of non-operational assets are investment properties and assets that are surplus to requirements, pending sale or redevelopment. Officers’ Remuneration. All sums paid to or receivable by an employee and sums due by way of expenses allowances (as far as those sums are subject to UK Income Tax). Operating Leases. A lease other than a finance lease, i.e. a lease which does not transfer the risks and rewards of ownership to the lessee. Operating Assets. All items which derive from events or transactions that fall within the ordinary activities of the Council and which need to be disclosed separately by virtue of their size or incidence to give fair presentation of the accounts. Past Service Costs (Pensions). The increase in the present value of the scheme liabilities related to employee service in prior periods arising in the current period as a result of the introduction of, or improvement to, retirement benefits. Pensions Reserve. The Pensions Reserve absorbs the timing differences arising from different arrangements for accounting for post-employment benefits and for funding benefits in accordance with statutory provisions. Prior Period Adjustments. Those material adjustments applicable to prior years arising from changes in accounting policies or from the correction of fundamental errors. They do not include normal recurring corrections or adjustments of accounting estimates made in prior years. Public Private Partnerships (PPP). Those partnerships enable the Council to purchase services from the private sector and pay a fee based on pre-defined output criteria. The private sector uses this fee to repay loans taken out to finance the building or refurbishment of the assets. Residual Value. The net realisable value of an asset at the end of its useful life. Related Party Transactions. A related party transaction is the transfer of assets or liabilities, or the performance of services by, to or for a related party irrespective of whether a charge is made. Renewal and Repairs fund. This contains funds credited at the Council’s discretion from the General Fund and is available for use on capital or revenue expenditure on Council assets. Revaluation Reserve. Records unrealised gains arising since 1 April 2007 from holding fixed assets not yet realised through sales. Service Expenditure Analysis (SEA). An analysis which groups together expenditure on services within headings or divisions as defined in the Service Reporting Code of Practice (SeRCOP). Specific Government Grants. These are grants received from Central Government in respect of a specific purpose or service. Unusable Reserves. Those reserves which hold unrealised gains and losses where amounts would only become available to provide services if the assets are sold and reserves that hold timing differences. Usable Reserve. Those reserves which the Council may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use. Useful Life. The period over which the Council will derive benefits from the use of a fixed asset.
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www.argyll-bute.gov.uk __________________________________________ Page 143 Appendix A Trade Union Facility Time Statement 2021-22 This information is published under the Trade Union (Facility Time Publication Requirements) Regulations 2017 Schedule 2 (Regulation 8) 1. Relevant union officials Total number of employees who were relevant union officials during the relevant period. Number of employees who were relevant union officials during the relevant period Full time equivalent employee number Central Function 23 22.4 Education Function 10 10 Note: The headcount figure for relevant union officials includes all stewards and school-based reps who are elected by their peers to provide first line support for members. 2. Percentage of time spent on facility time Number of employees who were relevant union officials employed during the relevant period spent who spent 0%, 1%-50%, 51% - 99% or 100% of their working hours on facility time. Percentage of time Number of employees Central Function Education Function 0% 0 8 1% - 50% 22 1 51% - 99% 1 0 100% 0 1
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www.argyll-bute.gov.uk __________________________________________ Page 144 3. Percentage of pay bill spent on facility time The percentage of the total pay bill spent on paying employees who were relevant union officials for facility time during the relevant period. Central Function Education Function The total cost of facility time £105,399 £68,702 The total pay bill (Finance figures) £111,639,440 £59,102,978 The percentage of the total pay bill spent on facility time 0.09% 0.12% 4. Paid Trade Union activities Percentage of total paid facility time hours spent by employees who were relevant union officials during the relevant period on paid trade union activities. Central Function Education Function Time spent on paid trade union activities as percentage of total paid facility time hours calculated as: (total hours spent on paid trade union activities by relevant union officials during the relevant period ÷ total paid facility time hours) x 100 0% 0%