Financial Risks Analysis 2026-27
Argyll and Bute Council · 19 February 2026
Back to Budget Pack — 19 February 2026 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 FINANCIAL SERVICES COUNCIL 25 FEBRUARY 2026 FINANCIAL RISKS ANALYSIS 2026-27 1 EXECUTIVE SUMMARY 1.1 The main purpose of this report is to provide a summary of the key financial risks facing the council. 1.2 A number of council wide financial risks, both revenue and capital, have been identified, in addition to specific departmental or service risks. For each departmental risk, the potential annual financial impact has been quantified, and the likelihood of the risk materialising assessed, based on a standard risk matrix. 1.3 There are currently 6 council wide revenue risks identified for 2026-27, with a potential annual value totalling £7.1m, and with varying degrees of likelihood. 1.4 There are currently 30 departmental risks, with a potential annual value totalling £4.557m, of which 5 are categorised as ‘Likely’. 1.5 Financial risks are monitored and reviewed on an ongoing basis, with actions put in place to continue to mitigate or manage these risks.
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ARGYLL AND BUTE COUNCIL FINANCIAL SERVICES COUNCIL 25 FEBRUARY 2026 FINANCIAL RISKS ANALYSIS 2026-27 2. INTRODUCTION 2.1 This report outlines the process and approach to financial risk assessment and provides details of the currently known key financial risks facing the council in 2026-27. 3 DETAIL 3.1 Introduction 3.1.1 The council is currently in a period of significant financial challenge. In developing its budget to address both funding, and cost and demand pressures, consideration is given to financial risk. However, both existing and new or emerging financial risks require to be monitored and reviewed on an ongoing basis throughout the year, with actions put in place to mitigate or manage these risks. Risks that cannot be mitigated or managed may have a detrimental impact on the financial position of the council. 3.1.2 There are a number of risks that may impact income or expenditure across the entire council. These are identified as council wide risks. In addition, specific financial risks impacting each department or service of the council have been considered. These are identified as departmental/service risks. A de-minimis level of £50k has been applied. Risks with a potential annual risk value below this level are expected to be managed within the relevant overall service budget. 3.1.3 For each risk, the potential annual financial impact has been quantified and the likelihood assessed based on the following standard risk matrix: 1 – Remote 2 – Unlikely 3 – Possible 4 – Likely 5 – Almost Certain 3.2 3.2.1 Council Wide Risks General There is a risk of further severe weather incidents, requiring both revenue and capital expenditure to be incurred. Whilst there may be additional funding available through the Bellwin Scheme, this is limited to eligible revenue expenditure only and there is an assumption that local authorities will budget to cover a proportion of the costs of emergency incidents from within internal resources. The threshold over and above where Councils’ can claim for eligible
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expenditure is 0.2% of a local authority's budgeted net revenue expenditure and, for 2025-26, this equates to £0.613m for Argyll and Bute Council. In 2025-26 additional budget of £2.9m was provided in respect of severe weather incidents however there is no provision for additional costs in this respect within either the 2026-27 Revenue Budget or the 2026-29 Capital Plan The potential additional costs are difficult to estimate by their very nature, however, a potential risk value of £3m is deemed to be reasonable. Revenue 3.2.2 Whilst the 2026-27 draft budget provides for inflationary increases, there is a risk of continued volatility in utilities pricing and demand can also be subject to unpredictable weather extremes. A potential annual risk value equivalent to 5% of the annual utilities budget provision is deemed reasonable. This equates to £0.4m. 3.2.3 In respect of the Health and Social Care Partnership, it is the responsibility of the Chief Officer and Chief Financial Officer to manage the HSCP financial position. If an overspend is forecast, a budget recovery plan will be prepared and submitted to the IJB, Argyll and Bute Council and NHS Highland. Where recovery plans are unsuccessful and an overspend occurs at the financial year end, and there are insufficient reserves to meet the overspend, then the partners will be required to make additional payments to the HSCP. The council would have to contribute towards any overspend related to Social Work. Whilst any additional payments by the council and NHS Highland will be deducted from future years funding, there is a risk that the council may require to make an additional unbudgeted contribution to the HSCP during the year. The financial situation facing Social Work is extremely challenging due to rising demand for services, workforce shortages and the increasing complexity of care which are pushing costs upward at a pace that exceeds available funding. At the same time, inflationary pressures and the need to maintain safe staffing levels are stretching already constrained budgets. At the time of writing this report, the forecast Social Work budget for 2026-27 has a £2.872m funding gap, after accounting for additional contributions from the council in respect of pay award budget assumptions and assuming all proposed savings are accepted by the IJBWithin the budget pack it is recommended that Members consider a funding allocation to bridge this gap however there remains a risk that should the HSCP fail to deliver on their savings proposals, or further pressures are identified, the council may require to make an additional unbudgeted contribution to the HSCP during the year At this stage, the overall potential annual risk value has been estimated at £2m. 3.2.4 The estimated level of Council Tax income is based on current and forecast Band D equivalents, and reflects our expected collection rates, based on historical data. A potential annual risk value equivalent to 1% of the annual Council Tax income budget is deemed reasonable. This equates to £0.8m. 3.2.5 The 2026-27 Budget Pack includes both Operational/Management and Policy savings options, totalling £6.090m. Whilst the council has a good track record in delivering savings, there is a risk that this target will not be fully delivered. A
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potential annual risk value equivalent to a 10% shortfall in the annual savings target is deemed reasonable. This equates to £0.6m. 3.2.6 There is an ongoing requirement to fund unavoidable inflationary cost increases across a number of areas such as, food and fuel. The Bank of England is currently forecasting that inflation will continue to fall throughout the year, towards the 2% government target. This position will continue to be closely monitored, with financial forecasts updated to reflect information available on an ongoing basis. The annual budget is underpinned by inflationary assumptions, however, there is a risk that inflationary impacts have been under-estimated. A potential annual risk value equivalent to 10% of the inflationary assumptions in respect of relevant non-pay budgets is deemed reasonable. This equates to £0.3m. 3.2.7 The council’s Property Services currently facilitate and manage repairs, maintenance and renewals in respect of the council’s property asset portfolio, funded via annual revenue Central Repairs Account (CRA) budgets and capital resources allocated to asset sustainability. Annual CRA budget allocations have been consistently overspent in recent years due to an ageing estate, increasing in statutory testing, emergency repairs and increases in supplier/contractor charges. Within the budget pack the Review of Capital Arrangements Report addresses this issue by proposing a multi-year Corporate Property Repairs, Maintenance and Renewals Programme, supporting a longer-term strategic approach to planning which would include a financial commitment to fund this for a period of 3 years initially. There is a risk that if this recommendation is not approved by Council then the current CRA budgets would be insufficient to meet demands. Capital 3.2.8 The Finance Circular 1/2026 received on 13 January 2026 provided details of Scottish Government grant funding for 2026-27. There is, therefore, a degree of certainty in respect of General Capital Grant funding for 2026-27, with 2027-28 funding assumed at the same level. At the time of writing, the council’s share of an additional £20m Climate Emergency Fund, to be paid as General Capital Grant in 2026-27, has still to be confirmed. The Capital Plan has assumed additional funding of £0.482m in this respect for 2026-27 only. Any variation in the allocation of 2026-27 Climate Emergency Funding, or in the available 2027-28 General Capital Grant, from these assumptions will require to be managed within the overall Capital Plan resources. 3.2.9 The funding framework for the approved Capital Plan includes capital receipts from asset sales, estimated at £2.0m over the 2 years 2026-28, profiled £1.5m 2026-27 and £0.5m 2027-28. This is based on an assessment provided by the Estates Team in January 2026. However, it should be noted that this is largely predicated on a single significant sale value being delivered in 2026-27. The level of receipts that may reasonably be achieved will be kept under review, to reflect changing market conditions and due diligence undertaken on asset condition. Any variation from this assumption will require to be managed within the overall Capital Plan resources. It is generally the case that the capital programme experiences slippage throughout the year and as such, this risk is expected to be manageable.
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3.2.10 The overall funding framework for capital and the affordability of capital investment is based on a set of assumptions in respect of several variables, which will continue to be subject to change on an ongoing basis, for example, slippage in the delivery of capital projects or changes to interest rate forecasts. The Section 95 Officer will require to take a strategic approach and exercise flexibility within the capital funding framework, in order to manage the impact of investment decisions on the annual revenue budget and in the context of safeguarding the council’s longer term financial sustainability. 3.2.11 The capital programme continues to be subject to significant inflationary price increases, supply chain issues and longer lead in times, due to the impact of world events on the global economy. Whilst these impacts have been managed to date within available resources, there are likely to be other significant cost pressures in respect of projects, where contracts have yet to be entered into, which are not quantifiable, at this stage. It will be challenging to manage these impacts within available resources and target completion timescales. Actions to manage financial risk within available resources may include re-profiling, project redesign, re-engineering or curtailment, and the re-prioritisation of uncommitted resources across the programme. 3.2.12 The council’s funding bid to the Scottish Government’s Learning Estate Investment Programme (LEIP) for a new school campus on Mull was successful. While this is good news and will provide welcome investment in the school estate, it will not meet the full cost of the project. The funding gap requires to be met by the council and presents a financial pressure. The Scottish Government will fund up to 50% of eligible costs, with the balance of circa. £20m to be funded by the council. To date, the council has earmarked reserves totalling £9m in this respect. Further consideration will be given to augmenting the current level of provision towards the council’s funding contribution, as part of the 2026- 27 budget process. 3.2.13 The Capital Plan monitoring report, as of 31 December 2025, outlines a forecast overspend on the 2025-28 Capital Plan of £0.166m, however, this is expected to be managed within existing available resources. No additional spend approvals are being sought in this respect, at this stage. However, there are spending requirements totalling £3.385m, deemed to be essential, either critical to maintain service delivery, or to comply with legislation or regulation (Red RAG status risks), that cannot be managed within existing available resources and Members will be requested to approve additional resources in respect of these requirements. 3.2.14 The council wide risks are summarised within the following table: Description Likelihood Assessed Financial Impact £m Unbudgeted Severe Weather costs 4 3.0 Energy costs increase by 5% greater than budgeted 3 0.4
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IJB refer to Council for additional funding to deliver social work services 3 2.0 1% variation in Council Tax Income 2 0.8 10% shortfall on Savings delivery 2 0.6 10% variation on General Inflation 3 0.3 Total 7.1 3.3 Departmental/Service Risks 3.3.1 It should be noted that the council has a good track record of delivering services within budget, however, there are specific financial risks impacting each council department or service. The detail of each departmental financial risk is included within Appendix 1. The following table provides a summary of the number of risks within each department, across each likelihood category, together with the potential annual financial impact value. Department 1 - Remote 2 - Unlikely 3 - Possible 4 - Likely 5 - Almost Certain Total No £000 No £000 No £000 No £000 No £000 No £000 Chief Executive's Unit 0 0 0 0 0 0 0 0 0 0 0 0 Executive Director Douglas Hendry 0 0 5 450 8 680 1 60 0 0 14 1,190 Executive Director Kirsty Flanagan 2 150 2 183 8 1,995 4 1,039 0 0 16 3,367 Total 2 150 7 633 16 2,675 5 1,099 0 0 30 4,557 3.3.2 The current top 3 risks in terms of the financial impact are noted in the table below. SERVICE TITLE OF RISK DESCRIPTION OF RISK LIKELIHOOD FINANCIAL IMPACT £000 Financial Services Non- Domestic Rates A revaluation exercise is due for the 2026-27 year and the impact is not known. Assuming the rateable value of the Council's taxed assets increase at a similar annual rate to those seen at the 2023- 24 revaluation, the result could be an increase of circa 20%, equivalent to around £1m. The outcome of the 2023-24 appeals has still to be concluded which could result in a repayment hence this is only being identified as a risk at this stage. 3 1,000
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Roads and Infrastructure Services Piers & Harbours Income Changes to ferry services resulting in reduced berthing and passenger income. As Cal Mac work to provide services across their network, an ageing fleet and delays to new ferries coming into service is meaning larger ferries are being removed from routes where we have the berthing infrastructure (mostly Craignure). Smaller ferries are allowing for services to operate but the drop in income can be up to 75% per berthing. 4 700 Roads and Infrastructure Services Roads Maintenance - Roads Network Adverse weather conditions result in deterioration of the road network necessitating greater spend on repair of defects. 3 230 3.3.3 The risks that are categorised as ‘likely’ are outlined in the table below. SERVICE TITLE OF RISK DESCRIPTION OF RISK LIKELIHOOD FINANCIAL IMPACT £000 Roads and Infrastructure Services Piers & Harbours Income Changes to ferry services resulting in reduced berthing and passenger income. As Cal Mac work to provide services across their network, an ageing fleet and delays to new ferries coming into service is meaning larger ferries are being removed from routes where we have the berthing infrastructure (mostly Craignure). Smaller ferries are allowing for services to operate but the drop in income can be up to 75% per berthing. 4 700 Development and Economic Growth Homelessness Temporary Accommodation Income Unpredictable number of Homeless applications. Inability to recover rent. Increase costs of property maintenance and tenancy change over. 4 150 Roads and Infrastructure Services Fleet Maintenance Increased costs to maintain internal fleet due to inflationary increases on vehicle parts. 4 100 Financial Services NDR ALEO Relief Clawback Risk that the Council will experience a reduction in General Revenue Grant due to the phased clawback of 4 89
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Non-Domestic Rates relief awarded to ALEOs in excess of the agreed baseline, following confirmation by the Scottish Government that the ALEO relief clawback policy will be implemented in future years with clawback applied two years in arrears, beginning in 2026-27 for excess relief awarded in 2024-25. Legal and Regulatory Support Elections Should a bi-election be required this would be an immediate cost pressure as budget has been removed. 4 60 3.4 Monitoring of Financial Risks 3.4.1 Financial risks are monitored and reviewed on an ongoing basis, with actions put in place to continue to mitigate or manage these risks. The updated position on financial risks will continue to be regularly reported to Policy and Resources Committee. 3.5 Potential Future Risks 3.5.1 There is a risk that changes to government policy may require to be implemented by the council, with associated unbudgeted costs not fully met by additional funding. For example, an extension to funded childcare to all 1 and 2 year olds across Scotland. 3.5.2 The Council’s bid to the Scottish Governments Learning Estate Investment Programme (LEIP) for funding for a new school campus on Mull was successful and a report was considered by Council on 24 April 2024. Approval was granted to utilise £5m of £9m previously earmarked funds to develop the Business Case. The Scottish Government will fund up to 50% of eligible costs and the estimated cost is £43m, with £41m deemed eligible, however these are just estimates at this stage. The Council will need to make a decision as to whether to proceed once the project has been tendered. There is a risk that the cost will be higher than estimated and consideration requires to be given to augmenting the current level of provision towards the council’s potential funding contribution, based on current affordability. There is also a risk that delays associated with the ongoing Judicial Review will result in further cost increases. 3.5.3 The Scottish Government has announced proposals for reduced teacher class contact time, the purpose of the reduced time teaching has yet to be agreed at COSLA. However, it is likely that it will include planning, preparation and increased collaboration. This could be a phased implementation although again no agreement has been reached. The aim is to empower teachers to deliver better educational outcomes for our children and young people. However, there are ongoing concerns regarding the potential cost implications, the ability to recruit to additional posts, the impact on subject specialist teaching time
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especially in smaller secondary schools and the impact on other educational services. 3.5.4 The Scottish Government’s announcement for the 2026-27 budget included investment in breakfast clubs and after-school clubs for schools. This included universal breakfast clubs for every primary pupil by August 2027 and after school clubs for all primary children who would like to access them. At this stage it is unclear how these initiatives will be funded and what the funding that is provided will cover. There is a risk that our large number of remote and rural schools will have significantly higher costs to deliver these services to very small numbers of children. Furthermore, there may also be transport issues and recruitment and resourcing issues. 4 CONCLUSION 4.1 This report summarises the known key financial risks facing the council in 2026- 27. There are 6 council wide risks and 30 departmental risks identified, with 5 categorised as ‘Likely’. These risks are monitored and reviewed on an ongoing basis, with actions put in place to continue to manage or mitigate the risks. 5 IMPLICATIONS 5.1 Policy None. 5.2 Financial Outlines the potential annual value of financial risks. 5.3 Legal None. 5.4 HR None. 5.5 Customer Service None. 5.6 Risk Provides details of financial risks. 5.7 Climate Change None. 5.8 Fairer Scotland Duty None. 5.9 Equalities (Protected Characteristics) None. 5.10 Consumer Duty None. 5.11 Island Communities None. 5.12 Children’s Rights and Wellbeing None. Kirsty Flanagan Executive Director/Section 95 Officer 11 February 2026 Councillor Ross Moreland, Policy Lead for Finance and Commercial Services APPENDICES Appendix 1 – Detail of Department/Service financial risks. For further information contact Anne Blue, Head of Financial Services anne.blue@argyll-bute.gov.uk
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APPENDIX 1 DEPARTMENT/SERVICE FINANCIAL RISKS 2026-27 DEPARTMENT SERVICE TITLE OF RISK DESCRIPTION OF RISK MITIGATING ACTIONS IN PLACE LIKELIHOOD FINANCIAL IMPACT £000 Executive Director Douglas Hendry Commercial Services Catering Costs - Provision of Meals to Early Years Children The Children and Young People (Scotland) Act placed duties on Councils to provide meals in an Early Years setting to entitled children where sessions span over lunch time. The total quantum of grant funding is reducing and may not be sufficient to fund the additional costs depending on uptake and the additional costs to support the meal provision in partner provider settings. Joint strategy with procurement colleagues to reduce potential impact of supplier charges. Control food wastage/portion controls. 2 100 Executive Director Douglas Hendry Commercial Services Rental Income from Properties Due to current economic climate, there may be reduced ability to recover rental income from leased properties or place suitable tenants in properties as leases come to an end. Management of leasehold properties by Estates team, any issues with debt recovery being dealt with in line with Council debt recovery policy. 3 100 Executive Director Douglas Hendry Commercial Services Surplus Properties Ongoing market difficulties lead to increased numbers of surplus properties, in addition, as Our Modern Workspace Project gains traction more properties will become surplus to operational requirements. There are residual running costs associated with all surplus properties. One Council property team in place who will monitor market conditions and work with prospective tenants/ purchasers to let/sell surplus properties. 3 50 Executive Director Douglas Hendry Education Pre-Five Units - retention of partner providers Failure in the commissioning or retention of pre-five partner provider units to deliver 1140 hours would result in an increased pressure on the Council to deliver the service. Annual financial appraisal, uplift of sustainable rate to providers; Support network; Short-term cash injections. 2 100 Executive Director Douglas Hendry Education Children and Young People (Scotland) Act - ELC 1140 hours The Council has been required to deliver 1140 hours of Early Learning and Childcare since August 2021. The Scottish Government has committed to funding this and the Council has revised its service model to align it to the Scottish Government's reduced funding profile. A risk remains that actual costs of delivery exceeds available funding in any given year. For example, if child numbers are higher than estimated, this may require additional staffing which has not been included in the staffing model funded by Scottish Government. Continuous monitoring and review of the service model, usage and resources. 3 100 Executive Director Douglas Hendry Education ASN Support Demand for ASN support continues to increase. Scottish Government statistics suggest 40.5% of school children have an identified additional support need, this has more than doubled since 2014 from 20%, resulting in an additional resource requirement particularly where gaps in our enhanced provision exist, the geographical barrier which further hinders our ability to deliver equitable service to all children requiring significant ASN support. Further, the increase in Children and Young People accessing support for mental health issues and the increased numbers awaiting assessment for Neuro related issues can impact presentation in education. The medium-term detriments on the development of young children which occurred as a consequence of service closures during the COVID pandemic have increased demands on the service as children require additional support to catch up. The Additional Support for Learning National Implementation plan continues to inform our strategic direction in line with the Angela Morgan Review. Service is currently implementing alternative options for service delivery to mitigate the inescapable pressures. Continuing to ensure robust assessment of needs, monthly monitoring of budget, any delays in recruitment factored into projections to enable informed decision making on allocation of funding for new/amended /additional support packages. Following a full ASN review, the service are currently investing in four new learning centres in order to provide greater equity in meeting the more complex needs of some learners as well as considering plans to develop enhanced wellbeing resources across our learning estate in future. This aims to reduce the frequency of children having to be educated in high cost out of area placements. 2 50 2026-27
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DEPARTMENT SERVICE TITLE OF RISK DESCRIPTION OF RISK MITIGATING ACTIONS IN PLACE LIKELIHOOD FINANCIAL IMPACT £000 Executive Director Douglas Hendry Education Legislative Requirements - Scottish Languages Act The Scottish Parliament agreed the Scottish Languages Act. This is Act gives the Gaelic and Scots languages official status in Scotland and makes changes to the support for the Gaelic and Scots languages in Scotland. This includes changes in relation to Gaelic and Scots education. It is clear that an education authority’s duty to secure the provision of adequate and efficient school education for the authority’s area may include Gaelic learner education and Gaelic medium education. This no longer applies only in Gaelic speaking areas. The teaching of the Gaelic language as part of an education authority’s duty to provide further education also no longer applies only in Gaelic speaking areas. Therefore, these powers (along with the other provisions within the Act) also help to ensure that Gaelic medium primary pupils are able to continue their Gaelic education in secondary school. Catchment areas for Gaelic Provision must be set out and whilst we have custom and practice we have not established these formally. Engage with the new Act to understand fully the requirements for Education Service and ensure continuous monitoring and review of the service model and resources available within budget. Establish a timeline to implement changes required by the Act. Continue to seek to recruit more Gaelic Teachers on flexible contracts. 3 50 Executive Director Douglas Hendry Legal and Regulatory Support Hub DBDA/DBFM Schools - Litigation Increased risk of the requirement to litigate due to latent defects in a number of schools Ongoing reporting of issues and monitoring of actions taken to repair. 2 150 Executive Director Douglas Hendry Legal and Regulatory Support Legal Services - Litigation Increased number of litigation cases. Ensure Legal Services are gateway to access all legal advice and that advice is sought at earliest opportunity. 3 150 Executive Director Douglas Hendry Legal and Regulatory Support Contract RPI for NPDO and Hub Schools Increase in RPI would result in higher costs. Monitoring annual alteration to contract RPI rate and mitigation through financial forecasting and review of existing budget. 3 100 Executive Director Douglas Hendry Legal and Regulatory Support NPDO - Increase in insurance costs within NPDO Schools Increase in insurance costs as a result of the long-term effects of Covid-19 on the insurance market and flood claims. Monitoring annual alteration to contract insurance rate and mitigation through financial forecasting and review of existing budget. 3 75 Executive Director Douglas Hendry Legal and Regulatory Support Elections Should a bi-election be required this would be an immediate cost pressure as budget has been removed. Outwith direct management control. 4 60 Executive Director Douglas Hendry Legal and Regulatory Support Licensing Reduced numbers of licensing applications leading to reduced income. Monitoring of trends and reporting the financial impact in the budget monitoring. 3 55 Executive Director Douglas Hendry Legal and Regulatory Support NPDO/Hub DBFM contract management efficiencies Reduction in ability to generate contract management efficiencies. Monitoring annual efficiencies generated and mitigation through robust contract management and application of contract specifications / requirements. 2 50 Executive Director Kirsty Flanagan Customer Support Services Software Licences Potential risk of being under licensed for software which will be identified via software audits which would incur additional costs. ICT security and compliance officer in post and duties include review of systems to ensure fully licenced. 2 100 Executive Director Kirsty Flanagan Development and Economic Growth Homelessness Temporary Accommodation Income Unpredictable number of Homeless applications. Inability to recover rent. Increase costs of property maintenance and tenancy change over. Provision of Housing Options information and advice service to minimise number of applicants proceeding to full homeless application. Implementation of Rapid Rehousing Plan. 4 150 Executive Director Kirsty Flanagan Development and Economic Growth Dangerous Buildings Interventions Building Standards having to deal with an increasing level of dangerous building work which has significant financial implications for Council. Monitor activity and seek to recover costs from the owner. 3 100 Executive Director Kirsty Flanagan Development and Economic Growth Planning fee shortfalls Due to downturn in economic / building activity, in particular renewable energy development and other major developments could lead to planning fee income shortfalls leading to revenue budget pressures. Current income levels are looking more positive, however, we are dependent on some high value applications coming in which, if they don't materialise, will impact the overall position. Will continue to monitor Development Management income and expenditure tightly and investigate further income generation streams. 1 100 Executive Director Kirsty Flanagan Development and Economic Growth Building Warrant fee shortfalls Due to loss of commercial income and downturn in economic / building activity, building warrant fee income shortfalls leading to revenue budget pressures. Continue to monitor Building Standards income and expenditure tightly and investigate further income generation streams. 1 50
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DEPARTMENT SERVICE TITLE OF RISK DESCRIPTION OF RISK MITIGATING ACTIONS IN PLACE LIKELIHOOD FINANCIAL IMPACT £000 Executive Director Kirsty Flanagan Financial Services Non-Domestic Rates A revaluation exercise is due for the 2026-27 year and the impact is not known. Assuming the rateable value of the Council's taxed assets increase at a similar annual rate to those seen at the 2023-24 revaluation, the result could be an increase of circa 20%, equivalent to around £1m. The outcome of the 2023-24 appeals has still to be concluded which could result in a repayment hence this is only being identified as a risk at this stage. Outwith direct management control. 3 1,000 Executive Director Kirsty Flanagan Financial Services NDR ALEO Relief Clawback Risk that the Council will experience a reduction in General Revenue Grant due to the phased clawback of Non-Domestic Rates relief awarded to ALEOs in excess of the agreed baseline, following confirmation by the Scottish Government that the ALEO relief clawback policy will be implemented in future years with clawback applied two years in arrears, beginning in 2026-27 for excess relief awarded in 2024-25. Monitoring of ALEO NDR relief against baseline; engagement with Live Argyll and Corporate Finance; financial planning to reflect anticipated General Revenue Grant reductions. 4 89 Executive Director Kirsty Flanagan Financial Services Sundry Debt Recovery Recovery of debt becomes more difficult to pursue in the current economic climate. Additional staff have been put in place in the Sundry Debt Team and remaining vacancies will be advertised shortly. This team will work jointly with Legal Services to enhance the robustness of the Council's debt recovery processes. 3 85 Executive Director Kirsty Flanagan Financial Services Housing Benefit Subsidy Ongoing pressure arising from limitations in Housing Benefit subsidy for temporary and supported exempt accommodation, where eligible rent exceeds subsidy thresholds. Current costs are expected to be managed within Financial Services budgets, but exposure could increase if demand or rent levels rise. Active monitoring of Housing Benefit expenditure and subsidy; budget management within Financial Services; use of in-year underspends to offset pressures; and review as part of financial planning. 2 83 Executive Director Kirsty Flanagan Roads and Infrastructure Services Piers & Harbours Income Changes to ferry services resulting in reduced berthing and passenger income. As Cal Mac work to provide services across their network, an ageing fleet and delays to new ferries coming into service is meaning larger ferries are being removed from routes where we have the berthing infrastructure (mostly Craignure). Smaller ferries are allowing for services to operate but the drop in income can be up to 75% per berthing. Closely monitor passenger number information coming from CalMac to identify any emerging trends with reducing passenger numbers. There is continuing conversation with CalMac to agree an annual flat fee for berthing which would remove the risk that we have with the current system. 4 700 Executive Director Kirsty Flanagan Roads and Infrastructure Services Roads Maintenance - Roads Network Adverse weather conditions result in deterioration of the road network necessitating greater spend on repair of defects. Manage maintenance budgets to ensure that spend is prioritised to deal with safety defects. 3 230 Executive Director Kirsty Flanagan Roads and Infrastructure Services Car Parking Income Reduced number of visitors to the area and use of council owned car parks resulting in a reduction in income. Closely monitor income levels throughout the year, especially in high visitor seasons. 3 200 Executive Director Kirsty Flanagan Roads and Infrastructure Services Winter Maintenance Adverse weather conditions which require greater than budgeted number of gritting runs. Monitor weather conditions and apply gritting policy to minimise costs. 3 150 Executive Director Kirsty Flanagan Roads and Infrastructure Services Other Harbours - Repairs and Maintenance Ageing assets and cost increases for repair work required to be undertaken. Unable to capitalise work carried out, service are aware of this as part of the wider RIS review as costs likely to reoccur if assets not replaced 3 130 Executive Director Kirsty Flanagan Roads and Infrastructure Services Street Lighting Age of lighting stock requires greater maintenance as health and safety becomes a consideration. Manage maintenance budgets to ensure that spend is prioritised to deal with safety defects. 3 100 Executive Director Kirsty Flanagan Roads and Infrastructure Services Fleet Maintenance Increased costs to maintain internal fleet due to inflationary increases on vehicle parts. Review of Fleet underway to determine where reductions could possibly be made. 4 100 30 4,557