Agenda reports pack
Argyll and Bute Council · 7 December 2023
Back to Policy and Resources Committee — 7 December 2023 and its agenda
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Argyll and Bute Council Comhairle Earra-Ghàidheal Agus Bhòid Executive Director: Douglas Hendry Kilmory, Lochgilphead, PA31 8RT Tel: 01546 602127 Fax: 01546 604435 DX 599700 LOCHGILPHEAD 30 November 2023 NOTICE OF MEETING A meeting of the POLICY AND RESOURCES COMMITTEE will be held ON A HYBRID BASIS IN THE COUNCIL CHAMBER AND BY MICROSOFT TEAMS on THURSDAY, 7 DECEMBER 2023 at 10:30 AM, which you are requested to attend. Douglas Hendry Executive Director BUSINESS 1. APOLOGIES FOR ABSENCE 2. DECLARATIONS OF INTEREST (IF ANY) 3. MINUTES (Pages 3 - 10) Policy and Resources Committee held on 12 October 2023 * 4. FINANCIAL REPORTS MONITORING PACK - 31 OCTOBER 2023 (Pages 11 - 130) Report by Section 95 Officer * 5. BUDGET OUTLOOK 2024-25 TO 2028-29 (Pages 131 - 152) Report by Section 95 Officer 6. BUDGET UPDATE REPORT (Pages 153 - 158) Report by Section 95 Officer * 7. 2024/2025 ANNUAL REVIEW - PROCUREMENT STRATEGY 2022/25 AND SUSTAINABLE PROCUREMENT POLICY 2022/25 (Pages 159 - 228) Report by Executive Director with responsibility for Legal and Regulatory Support 8. CONSERVATION AREA REGENERATION SCHEME (CARS) PROJECTS - 2-4 AND 6-10 ARGYLL STREET, LOCHGILPHEAD (Pages 229 - 236) Report by Executive Director with responsibility for Development and Economic Growth Public Document Pack
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9. NATURE RESTORATION FUND - SPEND OPTIONS (Pages 237 - 244) Report by Executive Director with responsibility for Development and Economic Growth, Roads and Infrastructure Services and Executive Director with responsibility for Commercial Services 10. SINGLE AUTHORITY MODEL UPDATE (Pages 245 - 248) Report by Chief Executive REPORTS FOR NOTING 11. POLICY AND RESOURCES COMMITTEE WORKPLAN (Pages 249 - 252) . Items marked with an “asterisk” are items, on the basis of information available at the time this Agenda is published, on which the Committee may not have delegated powers to act, and which may therefore require to be referred to the Council or another Committee, and that referral may depend on the decision reached at the meeting. . . Policy and Resources Committee Councillor Gordon Blair Councillor Robin Currie (Chair) Councillor Audrey Forrest Councillor Kieron Green Councillor Amanda Hampsey Councillor Fiona Howard Councillor Willie Hume Councillor Andrew Kain Councillor Reeni Kennedy-Boyle Councillor Jim Lynch Councillor Liz McCabe Councillor Yvonne McNeilly Councillor Ross Moreland Councillor Gary Mulvaney (Vice-Chair) Councillor Dougie Philand Councillor Alastair Redman Contact: Hazel MacInnes Tel: 01546 604269
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MINUTES of MEETING of POLICY AND RESOURCES COMMITTEE held ON A HYBRID BASIS IN THE COUNCIL CHAMBER AND BY MICROSOFT TEAMS on THURSDAY, 12 OCTOBER 2023 Present: Councillor Robin Currie (Chair) Councillor Gordon Blair Councillor Audrey Forrest Councillor Kieron Green Councillor Amanda Hampsey Councillor Fiona Howard Councillor Willie Hume Councillor Andrew Kain Councillor Reeni Kennedy-Boyle Councillor Jim Lynch Councillor Liz McCabe Councillor Yvonne McNeilly Councillor Ross Moreland Councillor Alastair Redman Also Present: Councillor Peter Wallace Attending: Pippa Milne, Chief Executive Douglas Hendry, Executive Director Anne Blue, Head of Financial Services Jane Fowler, Head of Customer Support Services Fergus Murray, Head of Development and Economic Growth Ross McLaughlin, Head of Commercial Services Fergus Walker, Revenue and Benefits Manager Stuart Green, Corporate Support Manager John Gordon, Programme Manager Stuart McLean, Committee Manager 1. APOLOGIES FOR ABSENCE Apologies for absence were received from Councillors Gary Mulvaney and Dougie Philand. 2. DECLARATIONS OF INTEREST Councillor Jim Lynch advised in relation to item 9 of the agenda (Place Based Investment Programme Fund 2021 – 2024 Allocations and Project Updates) that he had been appointed to the Oban BID Board by the Council. Having taken note of the updated Standards Commission Guidance in relation to declarations (issued on 7 December 2021) with specific reference to section 5.4(c) he did not consider that he had a relevant connection and as such would remain in the meeting. 3. MINUTES The Minutes of the meeting of the Policy and Resources Committee held on 10 August 2023 were approved as a correct record. * 4. FINANCIAL REPORTS MONITORING PACK - 31 AUGUST 2023 The Committee gave consideration to a report providing a summary of the financial monitoring reports as at the end of August 2023. There were five detailed reports setting Page 3 Agenda Item 3
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out the position as at 31 August 2023 which included the Revenue Budget Monitoring Report; Monitoring of Financial Risks; Capital Plan Monitoring Report; Treasury Monitoring Report and Reserves and Balances. Decision The Policy and Resources Committee – 1. noted the revenue budget monitoring report as at 31 August 2023; 2. noted the financial risks for 2023-24; 3. noted the capital plan monitoring report as at 31 August 2023 and approved the proposed changes to the capital plan as outlined in Appendix 4 of that report; 4. noted the treasury monitoring report as at 31 August 2023; 5. noted the reserves and balances report as at 31 August 2023; and 6. agreed to recommend to Council that the revenue virements over £0.200m during July and August 2023 are approved. (Reference: Report by Section 95 Officer dated 8 September 2023, submitted) * 5. BUDGET OUTLOOK 2024-25 TO 2028-29 The Committee gave consideration to a report providing an update to the budget outlook covering the period 2024-25 to 2028-29, previously reported to the Policy and Resources Committee on 10 August 2023. Decision The Policy and Resources Committee – 1. noted the current estimated budget outlook position for the period 2024-25 to 2028-29; and 2. agreed to recommend to Council that the budget for winter maintenance was right sized by utilising £0.326m of the £1.4m contingency that was set aside for inflationary increases as part of the 2023-24 budget setting process. (Reference: Report by Section 95 Officer dated 18 September 2023, submitted) 6. BUDGET SIMULATOR EXERCISE - FINDINGS The Committee gave consideration to a report outlining feedback from local communities on their priorities for bridging the £10M+ budget gap via the budget simulator exercise. Decision The Policy and Resources Committee agreed to take into account the budget simulator results when considering and preparing the budget for 2024/25. Page 4
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(Reference: Report by Executive Director with responsibility for Customer and Support Services dated 12 October 2023, submitted) 7. UPDATE ON EMPTY PROPERTY RELIEF IN NON-DOMESTIC RATES The Committee gave consideration to a report summarising key findings from the consultation on the potential use of empty business properties in Argyll and Bute. The consultation engaged with a diverse group of stakeholders including members of the public, property owners, community organisations and Elected Members. The report focused on the location and profile of respondents, barriers and challenges to occupying empty properties, potential new roles for vacant buildings, incentives and support measures, and the community impact of addressing vacant properties. Decision The Policy and Resources Committee – 1. noted the results of the Empty Property Relief Consultation and that a revised Policy would be brought to Council on 23 November 2023; and 2. noted that a member’s seminar would be held at the start of November to discuss the position and the options for a new policy. (Reference: Report by Head of Financial Services dated 18 September 2023, submitted) 8. DEVELOPMENT OF AREA PLANS TO REFLECT INVESTMENT OPPORTUNITIES The Committee gave consideration to a report setting out an approach to delivering area based plans for all communities, reflecting investment opportunities and local service prioritisation as part of the delivery of the approved Corporate Plan 2023 – 2027. Decision The Policy and Resources Committee agreed – 1. that the number of locality plans covering Argyll and Bute was 8 plans (option A), as set out in paragraphs 4.31 to 4.33 of the submitted report; 2. the principles on which the initiative would be designed and implemented as set out in paragraph 4.35 of the submitted report; 3. the approach to the aforementioned initiative as set out in paragraphs 4.36 to 4.40 of the submitted report; 4. the resourcing and timescales as set out in paragraphs 4.41 to 4.45 of the submitted report; 5. to reflect any relevant outcomes from the Community Planning Partnership Community Wealth Building Review in the approach to producing area plans, noting that the report would be completed before the work started on the plans; and Page 5
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6. to an allocation of £200,000 from the Council’s Priorities Investment Fund to fund two temporary posts and associated costs to allow commencement of this initiative. (Reference: Report by Chief Executive dated 20 September 2023, submitted) 9. PLACE BASED INVESTMENT PROGRAMME FUND 2021 – 2024 ALLOCATIONS AND PROJECT UPDATES The Committee gave consideration to a report providing an update on the Place Based Investment Programme allocation for the years 2021/22, 2022/23 and 2023/24 as well as the allocations agreed to individual projects and any subsequent change that had to be made as well as an update on progress of each project. Decision The Policy and Resources Committee - 1. noted the allocation of Place Based Investment funding provided from the period 2021- 2024; 2. noted the agreed allocation of the Place Based Investment funding during the period 2021-2024 to the projects in Table 1 of the submitted report; 3. approved any amendments to the funding allocation as detailed in paragraph 4.9 of the submitted report; 4. noted the update on each of the individual projects as detailed in Table 1 of the submitted report; and 5. agreed a delegation of powers to the Executive Director with responsibility for Development and Economic Growth to allow any subsequent amendment to approved Place Based Investment Programme grant allocations to ensure that any risk relating to payback of any grant is minimised; noting that it may involve swapping Place Based Investment Programme allocations with Crown Estate allocation of grants against individual projects but would not affect the projects but simply the grant source. (Reference: Report by Executive Director with responsibility for Development and Economic Growth dated September 2023, submitted) 10. CROWN ESTATES FUNDING (a) Crown Estate 2019-2023 Allocations and Project Updates The Committee gave consideration to a report providing an update on the Crown Estate allocations for the years 2019/20, 2020/21, 2021/22 and 2022/23 totalling £5,785,106.55 and the respective individual project allocations. The report also provided an update on any subsequent changes made to the allocations as well as providing an update on the progress of each of the projects. Decision Page 6
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The Policy and Resources Committee – 1. noted the allocation of Crown Estate funding provided from the period 2019- 2023; 2. noted the agreed allocation of the Crown Estate funding during the period 2019- 2023 to the projects in Table 1 and paragraph 4.4 of the submitted report; 3. approved the amendments to the funding allocation as detailed in paragraph 4.6 of the submitted report; 4. noted the update on each of the individual projects as detailed in Table 1 of the submitted report; 5. agreed to the continuation of delegated powers, as agreed in February 2023, to the Executive Director with responsibility for Development and Economic Growth to allow any subsequent amendment to approved Crown Estate grant allocations to ensure that any risk relating to having to payback any grant is minimised; noting that this may involve swapping Crown Estate allocations with Place Based Investment Programme allocations of grants against individual projects but would not affect the projects but simply the grant source. (Reference: Report by Executive Director with responsibility for Development and Economic Growth dated 14 September 2023, submitted) (b) Crown Estate 2023/24 Allocation and Possible Projects The Committee gave consideration to a report providing detail on the proposed allocation of the Crown Estate funding for 2023/24 following consultation with all Elected Members as agreed at the Policy and Resources Committee on 10 August 2023. Decision The Policy and Resources Committee – 1. noted that the formal allocation of Crown Estate funding for 2023/24 is still awaited; 2. noted the proposal to allocate a £1.0million prudent estimate of anticipated Crown Estate 2023/24 funding against individual projects pending receipt of the formal allocation; 3. noted that officers sought suggestions from Elected Members and are undertaking due diligence in reviewing those projects against the criteria set by the Scottish Government; 4. agreed to a delegation of powers to the Executive Director with responsibility for Development and Economic Growth, in consultation with the Leader, Depute Leader and Leader of the largest Opposition Group to approve the final list of projects to be supported by the £1.0million prudent allocation of Crown Estate 2023/24 funding; Page 7
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5. noted that officers would inform Elected Members of the decision taken by the delegation; and 6. noted that a further report would be brought back to members of the Policy and Resources Committee should the formal allocation for 2023/24 represent a higher figure than £1.0million. (Reference: Report by Executive Director with responsibility for Development and Economic Growth dated 14 September 2023, submitted) 11. RURAL GROWTH DEAL – UPDATE PAPER The Committee gave consideration to a report providing an update on the Rural Growth Deal Programme and in particular progress towards signing of the full deal agreement, which represented the next key milestone in the Rural Growth Deal process. Decision The Policy and Resources Committee – 1. approved a further drawdown of funding from the Inward Investment Fund (up to £150k); noting that similar to previous arrangements, funds would only be drawn down subject to the Chief Executive and two Executive Directors of the Council being satisfied that the monies were for the purpose of delivering the Rural Growth Deal; and that any further funding required in excess of the approved value would require further approval from the Policy and Resources Committee. 2. noted the process and anticipated timescales for signing the Full Deal Agreement with the Scottish and UK Governments. (Reference: Report by Executive Director with responsibility for Development and Economic Growth dated September 2023, submitted) Councillor Ross Moreland advised in relation to items 12 and 13 of the agenda, that he had been appointed to the Argyll Countryside Trust by the Council. Having taken note of the updated Standards Commission Guidance in relation to declarations (issued on 7 December 2021) with specific reference to section 5.4(c) he did not consider that he had a relevant connection and as such would remain in the meeting. 12. NATURE RESTORATION FUND - SPEND OPTIONS The Committee gave consideration to a report recommending the Council take forward a number of time sensitive and deliverable projects utilising the Nature Restoration Fund allocated by the Scottish Government. Decision The Policy and Resources Committee – 1. noted the allocation of Nature Restoration Funding received; Page 8
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2. agreed to the recommended projects as set out in Appendix 1 of the submitted report; and 3. agreed that officers bring forward a further list of projects for Members’ consideration to the Policy and Resources Committee in December 2023. (Reference: Report by Executive Director with responsibility for Development and Economic Growth and Roads and Infrastructure Services and Executive Director with responsibility for Commercial Services dated 12 October 2023, submitted) 13. CLIMATE CHANGE BOARD UPDATE AND DE-CARBONISATION TRACKER The Committee gave consideration to a report summarising and highlighting some of the recent activities of the Climate Change Board over the previous quarter. Decision The Policy and Resources Committee noted the updates contained at Section 5 and the full Decarbonisation Tracker update attached at Appendix A to the submitted report. (Reference: Report by Executive Director with responsibility for Commercial Services dated 12 September 2023, submitted) 14. POLICY AND RESOURCES COMMITTEE WORKPLAN The Policy and Resources Committee Workplan was before the Committee for noting. Decision The Policy and Resources Committee noted the content of the Workplan as at October 2023. (Reference: Policy and Resources Committee Workplan dated October 2023, submitted) The Committee resolved in terms of Section 50(A)(4) of the Local Government (Scotland) Act 1973 to exclude the press and public for the following item of business on the grounds that it was likely to involve the disclosure of exempt information as defined in Paragraphs 8 and 9 of Part 1 of Schedule 7A to the Local Government (Scotland) Act 1973. 15. ROTHESAY PAVILION UPDATE The Committee gave consideration to a report providing an update on the construction position and the efforts of the Lobbying Group in relation to the refurbishment of Rothesay Pavilion. Decision The Policy and Resources Committee agreed the recommendations contained within the submitted report. (Reference: Report by Executive Director with responsibility for Commercial Services and Executive Director with responsibility for Development and Economic Growth dated 21 September 2023, submitted) Page 9
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ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE FINANCIAL SERVICES 7 DECEMBER 2023 FINANCIAL REPORTS MONITORING PACK – 31 OCTOBER 2023 1. INTRODUCTION 1.1 This report provides a summary of the financial monitoring reports as at the end of October 2023. There are five detailed reports, setting out the position as at 31 October 2023, which are summarised in this Executive Summary: • Revenue Budget Monitoring Report • Monitoring of Financial Risks • Capital Plan Monitoring Report • Treasury Monitoring Report • Reserves and Balances 2. DETAIL 2.1 Revenue Budget Monitoring Report 2.1.1 This report provides a summary of the current revenue budget monitoring position to ensure net expenditure is contained within budget. It provides corporate and departmental information with comparisons on a forecast outturn and a year to date basis. 2.1.2 There is a forecast overspend of £0.080m as at the end of October 2023. The key variances are: - Within Roads, numerous variances accumulating to a £0.841m overspend – this is arising from an under-recovery of income in Piers & Harbours as a result of a reduced number of berthings, in Public Conveniences due to delayed installation of turnstiles, and on Traffic Regulation Orders (TROs) in Roads. This is combined with overspends on Pupil Transport driver/escort costs, Street Lighting Maintenance, staff costs in Amenities due to high sickness and turnover and an unachievable saving in relation to Depot Rationalisation. These are partially offset by an underspend in Public Transport payments to operators. - Within Financial Services, an overspend within the Scottish Welfare Fund on Community Care and Crisis Grants £0.210m. - Within Executive Director Kirsty Flanagan there is an over-recovery of vacancy savings, increased ferry grant income and savings on training costs amounting to a favourable projection of £0.586m. - Within Education, an underspend of £0.400m from Education due to slippage on Scottish Government 100 day Promise funding due to delays in recruitment is partially offset by an overspend of £0.309m from Schools Residential placements due to a higher than budgeted demand for this service resulting in an overall £0.091m underspend. - Within Treasury Management, there is a forecast underspend of £0.294m in Page 11 Agenda Item 4
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relation to a discount received on the early repayment of three loans. 2.1.3 There is a year to date overspend of £1.415m. More focus is on the forecast outturn position, hence why sometimes the year to date position is not updated. The year to date variances mainly relate to the timing of income and expenditure and recharging of costs to capital. 2.1.4 With regard to the ongoing financial impact of COVID-19, there are £5.512m of reserves committed to manage the impact of the pandemic. The detail behind these commitments is contained within Appendix 2 of the Reserves and Balances report. 2.1.5 Total policy savings relevant to 2023-24 financial year amount to £6.953m. The table below outlines their progress as at 31 October 2023. Category No. of Options 2023-24 £000 2023- 24 FTE 2024-25 £000 2024- 25 FTE Future Years £000 Future Years FTE Delivered 10 5,843.5 (0.7) 5,891.0 (0.7) 6,058.0 (0.7) On Track to be Delivered 4 656.0 2.5 629.0 11.9 560.0 12.4 Still to be Implemented 1 0.5 0.0 0.5 0.0 0.5 0.0 Being Developed 0 0.0 0.0 0.0 0.0 0.0 0.0 Will not be achieved 2 248.5 0.0 248.5 0.0 248.5 0.0 Potential Shortfall 2 180.0 0.0 180.0 0.0 180.0 0.0 Delayed 1 24.0 0.0 24.0 0.0 24.0 0.0 TOTAL 20 6,952.5 1.8 6,973.0 11.2 7,071.0 11.7 2.1.6 There are two savings marked as not going to be achieved. A cost pressure has been recognised in 2024-25 for one of these and the other will be met by underspends within the Service which will remove these savings targets. Two further savings are categorised as having a shortfall and one is currently delayed. Health and Social Care Partnership (HSCP) – Financial Update 2.1.7 The forecast outturn position at the end of August is an estimated overspend of £0.850m for 2023-24 (forecast to come in on budget for Social Work and overspend of £0.850m for Health). The HSCP’s financial position will continue to be monitored and Financial Services staff will engage with the HSCP Chief Financial Officer to ensure that mitigation actions are in place to address the deficit and ensure that no additional funding is required from the Council. 2.2 Monitoring of Financial Risks 2.2.1 This report outlines the process and approach developed in carrying out a financial risks analysis and provides an update on the current assessment of financial risks. Page 12
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2.2.2 There are 6 Council wide revenue risks identified for 2023-24 currently amounting to £3.661m. 2.2.3 There are currently 39 departmental risks totalling £5.265m. Of the 39 departmental risks, 6 are categorised as likely. These will continue to be monitored and action taken to mitigate or manage these risks. 2.2.4 The current top three risks in terms of the financial impact are noted in the table below. SERVICE TITLE OF RISK DESCRIPTION OF RISK LIKELIHOOD FINANCIAL IMPACT £000 Roads and Infrastructure Services Roads Maintenance - Bridges, Culverts & Sea Defences Extreme localised weather may result in loss of bridge, culvert, road or sea defence. 3 750 Roads and Infrastructure Services Waste PPP - Indexation Historical payments made towards Waste PPP based on indexation rates have been challenged by Renewi resulting in a potential cost to the council. 3 586 Roads and Infrastructure Services Winter Maintenance Adverse weather conditions which require greater than budgeted number of gritting runs. 4 365 2.2.5 2.2.6 There have been 4 changes to the departmental risks since the report as presented to the Policy and Resources Committee on 12 October 2023. These are outlined in paragraph 3.4.1 of the Financial Risks Report. There are four potential future risks relating to funded childcare for 1 and 2 year olds, the proposed new school campus on Mull, recovery costs associated with the recent weather incident and digital access for learners. Further information on these can be found within section 3.6 of the Financial Risks report. 2.3 Capital Plan Monitoring Report 2.3.1 2.3.2 This report provides a summary of the current capital plan monitoring position. Information is provided in terms of monitoring year to date budget, current full year budget, future years total budget and funding and non-financial in terms of project performance. In recent years, the Council has agreed additional funding for the capital programme totalling £10.803m to address specific costs related to dealing with COVID, inflationary pressures arising as a consequence of the factors detailed in paragraph 2.3.3 below and other cost pressures on the capital plan. To date, £8.1m has been Page 13
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allocated to projects leaving a balance of £2.703m available for allocation as required. 2.3.3 The impact of the pandemic along with the UK exit from the European Union, the Russian invasion of Ukraine and sanctions on Russian owned entities has seen significant price increases as well as disruptions to the supply chain and longer lead in times. The increased rate of inflation impacts costs such as energy prices, labour, packaging and transport. These all have an effect on the overall contract price and make it extremely challenging to manage expenditure and the availability of supply. As a result of this it should be noted that there are likely to be other significant financial impacts which are not quantifiable at this stage. 2.3.4 Actual net expenditure to date is £19.390m compared to a budget for the year to date of £19.360m giving rise to an overspend for the year to date of £0.030m (0.15%). 2.3.5 The forecast outturn for 2023-24 is a forecast net expenditure of £43.013m compared to an annual budget of £43.657m giving rise to a forecast underspend for the year of £0.644m (1.48%). 2.3.6 The forecast total net projects costs on the capital plan are £216.052m compared to a total budget for all projects of £216.014m giving rise to a forecast overspend for the overall capital plan of £0.038m (0.02%). 2.3.7 In respect of total project performance, there are 156 projects within the capital plan, 151 are complete or on target, 3 are off target and recoverable and 2 project is off track. 2.4 Treasury Monitoring Report 2.4.1 This report provides information on the current levels and recent transactions in relation to the capital financing limit, total borrowing, temporary borrowing and long term borrowing and investments. 2.4.2 The net movement in external borrowing for the period 1 September 2023 to 31 October 2023 was a decrease of £12m. 2.4.3 Borrowing is below the Capital Financing Requirement for the period to 31 October 2023, at this stage in the financial year capital expenditure is below target. Capital expenditure continued to be lower than anticipated over the last twelve months however there is an expectation this will increase back up again over 2023-24 which will continue to be monitored closely 2.4.4 The levels of investments were £72.251m at 31 October 2023. The average rate of return achieved was 5.105% which is below the target SONIA (Sterling Overnight Index Average) rate for the same period of 5.187%. Page 14
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2.5 Reserves and Balances 2.5.1 This report summarises the overall level of reserves and balances and monitors the spending of the earmarked reserves, providing detailed information on the unspent budget earmarked balances. 2.5.2 The Council has a total of £666.354m unusable reserves that are not backed with resources. They are required purely for accounting purposes. 2.5.3 At 31 March 2023, the Council had a total of £93.828m of usable reserves. Of this: • £2.916m relates to the Repairs and Renewals Fund • £4.503m relates to Capital Funds • £86.409m was held in the General Fund, with £79.466m of this balance earmarked for specific purposes. 2.5.4 During 2023-24, the amount of £4.776m which was previously agreed to be utilised from the one-off reprofiling gain from the Loans Fund Review was drawn down into Earmarked Reserves to be used to fund the Capital Programme as detailed in paragraph 3.5.1 of the reserves report. This results in the total earmarked balance increasing to £84.242m. 2.5.5 Of the earmarked balance of £84.242m: • £41.505m is invested or committed for major initiatives/capital projects • £4.629m has already been drawn down • £19.434m is still to be drawn down in 2023-24 • £18.674m is planned to be spent in future years 2.5.6 The table below summarises the position of the unallocated General Fund balance. Further explanation of the figures can be found at Section 3.4 of the Reserves and Balances report. Heading Detail £000 Unallocated General Fund as at 31 March 2023 This is the balance that is unallocated over and above the 2% contingency, which amounts to £5.6911 1,252 Budgeted allocation to General Fund for 2023-24 Budget Per the Budget Motion at Council on 23 February 2023 19 Current Forecast Outturn for 2023-24 as at 31 October 2023 Per paragraph 3.4.2. (80) Page 15
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Social Work outturn adjustment Per paragraph 3.4.3 - Social Work would expect to transfer any surplus to internal IJB reserves 0 Allocation from unallocated general fund balance Per paragraph 3.4.4 (8) Estimated Unallocated balance as at 31 March 2024 1,183 2.5.6 It can be seen that, after taking into consideration the budgeted allocation to the General Fund agreed by Council on 23 February 2023 of £0.019m, the current forecast outturn position for 2023-24 and the proposed allocation for floral displays the Council is forecast to have a £1.183m surplus over contingency. 2.6 VIREMENTS OVER £0.200m (Revenue) 2.6.1 Virement is the process of transferring budget between cost centres, services or departments or between capital projects. The Council’s constitution notes that virements over £0.200m require approval by Council. This section of the report will be used to outline revenue virements in the period that require approval. Capital virements are included within the capital monitoring report. 2.6.2 For the period September and October, there is one virement requiring authorisation: - £0.216m harvested within Executive Director Douglas Hendry against the vacancy savings target for the September period 3. RECOMMENDATIONS 3.1 It is recommended that the Policy and Resources Committee: a) Consider the revenue budget monitoring report as at 31 October 2023 b) Note the financial risks for 2023-24 c) Note the capital plan monitoring report as at 31 October 2023 and approve the proposed changes to the capital plan outlined in Appendix 4 of that report. d) Note the treasury monitoring report as at 31 October 2023 e) Consider the reserves and balances report as at 31 October 2023 f) Recommend to Council that the revenue virements over £0.200m during September and October 2023 are approved Page 16
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4. IMPLICATIONS 4.1 Policy – None. 4.2 Financial - Outlines the revenue and capital monitoring for 2023-24 as at 31 October 2023 4.3 Legal - None. 4.4 HR - None. 4.5 Fairer Scotland Duty - None. 4.5.1 Equalities – protected characteristics - None. 4.5.2 Socio-economic Duty - None. 4.5.3 Islands - None. 4.6 Climate Change - None. 4.7 Risk - Risks are included in financial risks report. 4.8 Customer Service - None. Kirsty Flanagan Executive Director /Section 95 Officer 3 November 2023 Policy Lead for Finance and Commercial Services - Councillor Gary Mulvaney For further information contact Anne Blue, Head of Financial Services anne.blue@argyll-bute.gov.uk Page 17
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REVENUE BUDGET MONITORING REPORT AS AT 31 OCTOBER 2023 POLICY AND RESOURCES COMMITTEE 7 DECEMBER 2023 2023-24 Overall Position: There is a forecast overspend of £0.080m as at the end of October 2023. Within Executive Director Douglas Hendry, there is a forecast underspend of £0.091m due to slippage in the utilisation of 100 day promise funding offset by an overspend within Residential Schools due to a higher than budgeted demand for this service. Within Executive Director Kirsty Flanagan, there is a forecast overspend of £0.465m due to an under-recovery of income in Piers & Harbours as a result of a reduced number of berthings, in Public Conveniences due to the delayed installation of turnstiles, and on Traffic Regulation Orders (TROs) in Roads. This is combined with overspends on Pupil Transport driver/escort costs, Scottish Welfare Fund Community Care and Crisis Grants, Street Lighting Maintenance, staff costs in Amenities due to high sickness and turnover and an unachievable saving in relation to Depot Rationalisation. These are partially offset by an over-recovery of vacancy savings, an underspend in Public Transport payments to operators and an underspend in training for Argyll & Bute Manager courses. Social Work is currently forecasting to break even at the end of the financial year. This is due to a combination of the over-recovery of vacancy savings, income from fees, charges and recharges and the use of non-recurring reserves to offset cost pressures arising from a high demand for services and the use of agency staff to fill staffing recruitment and retention gaps across adult services. Within Treasury Management, there is a forecast underspend of £0.294m in relation to a discount received on the early repayment of three loans. There is a year to date overspend of £1.415m. The year to date variances within the departments tend to relate to the timing of income and expenditure and costs to capital not recharged yet. Key Highlights as at October 2023: • Council services are projecting an overspend of £0.080m as at 31 October 2023. • As of 31 October, the 2023/24 pay settlement negotiations for Chief Officers and non-teaching staff remain ongoing. Update: a revised offer was made by employers to Unions on 3 November. Unison is currently consulting their members on the offer and we await the outcome of their ballot. In the meantime, COSLA has asked employers to partially implement the offer and, at the time of writing, the Council’s Payroll Team is working on this with a view to implementing the relevant pay rates and the related pay arrears due to staff covering April to October by the end of November. Key Financial Successes: Performance against budget for 2022-23 was an overall net favourable position of £3.326m underspend after adjusting for year-end earmarking. This breaks down as: • £0.347m net underspend in relation to Council service departmental expenditure • £6.937m net underspend in relation to other central costs largely due to a one-off treasury gain as a result of a discount on the early repayment of loans • £0.652m over-recovery of Council Tax income • £4.610m of unspent budget earmarkings Page 18
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Key Financial Challenges: Proposed Actions to address Financial Challenges: Addressing the long-term impact of the COVID pandemic on service demand and the increasing challenges facing departments across the Council in relation to the recruitment and retention of suitably qualified and experienced staff. Engagement and monitoring of both issues with departments to assess how these challenges are affecting service capacity and capability, staff attendance, utilisation of agency staff and costs. Collaboration with services and other back-office teams to consider and develop mitigating actions. Achieving a favourable year-end position and achieving savings targets in light of council wide risks to expenditure. Robust monitoring of the financial position and delivery of savings to ensure budget issues inform the budget monitoring process. Monitoring Social Work expenditure and more widely the IJB position as any overspend will transfer back to partner bodies in the first instance. Continue to work closely with the CFO of the IJB to ensure that early indication of any potential adverse financial outturn is identified and corrective action is agreed as appropriate to reduce the risk to the Council. Identifying further savings and delivering services more efficiently with less resources, as whilst a balanced 2023-24 budget was agreed in February 2023 there are still budget gaps in future years. The Council will continue to progress savings options identified, refine options that require further development and seek to identify further savings through themed reviews and business process reviews. Maintaining or improving the level of service income recovered, for example planning, building standards and car parking. Actively monitor income recovery and ensure Council fees and charges policies are regularly reviewed. Managing spend in service areas which are demand led and, to some extent, outwith service control, for example Winter Maintenance. Use a risk-based approach to budget monitoring to focus additional attention on these areas. Ongoing requirement to fund unavoidable inflationary increases in areas like utility costs, fuel, food etc. This is impacted further by the availability of supply because of the COVID-19 pandemic, UK exit from the European Union, Russia’s invasion of Ukraine and sanctions on Russian owned entities, to name a few influencing factors. Ensure emerging issues are highlighted as soon as possible so that the financial impact can be evaluated and reported through the budget monitoring and preparation processes. Cost of living crisis impacting on pay inflation negotiations which could result in pay awards above what is deemed affordable. Ensure emerging issues are highlighted as soon as possible so that the financial impact can be evaluated and reported through the budget monitoring and preparation processes. Page 19
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Forecast Outturn Position There is a forecast underspend of £0.080m for 2023-24 as at 31 October 2023. Department Annual Budget £'000 Forecast Outturn £'000 Current Forecast Variance £'000 Previous Forecast Variance £000 Change £000 Explanation Chief Executive's Unit 1,134 1,134 0 0 0 Executive Director (Douglas Hendry) 132,747 132,656 91 91 0 The projected underspend is due to slippage in the use of 100 day promise funding offset by an overspend within Residential School Budgets due to a higher than budgeted demand for this service. Executive Director (Kirsty Flanagan) 55,080 55,545 (465) (382) (83) This is due to an under-recovery of income in Piers & Harbours as a result of a reduced number of berthing’s, in Public Conveniences due to the delayed installation of turnstiles, and on TROs in Roads. This is combined with overspends on Pupil Transport driver/escort costs, Scottish Welfare Fund Community Care and Crisis Grants, Street Lighting Maintenance, staff costs in Amenities due to high sickness and turnover and an unachievable saving in relation to Depot Rationalisation. These are partially offset by an over-recovery of vacancy savings, an underspend in Public Transport payments to operators and an underspend in training for A&B Manager courses. Social Work 76,117 76,117 0 0 0 This is due to a combination of the over-recovery of vacancy savings, income from fees, charges and recharges and the use of non-recurring reserves to offset cost pressures due to high demand for services and the use of agency staff to fill staffing recruitment and retention gaps across Adult Services. Central Budgets 26,639 26,345 294 0 294 Recognition of a discount received on the early repayment of loans. Financed By (291,717) (291,717) 0 0 0 Total 0 80 (80) (291) 211 Page 20
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Further information on the departmental forecast variances is included later on in the report. (480) 20 520 April May June July August September October November December January February £ 000 Forecast outturn position for each Department from the start of the financial year Chief Executive's Unit Executive Director (Douglas Hendry) Executive Director (Kirsty Flanagan) Social Work Central Budgets Financed By Underspend Overspend Page 21
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Year to Date Position The year to date position as at 31 October 2023 is an overspend of £1.415m and the main variances are noted below. Department YTD Actual £'000 YTD Budget £'000 YTD Variance £'000 Explanation Chief Executive's Unit 730 734 4 The year to date underspend can be attributed to profiling issues. Executive Director (Douglas Hendry) 73,049 73,348 299 The year to date underspend position is due to receipt of historic utility charge refunds and underspends in Education within employee budgets, these are partially offset by an over spend within the Residential Schools budget. Under the Scheme of Devolved School Management (DSM) schools are permitted flexibility at yearend, therefore no forecast variance will be processed in relation to any school underspends. Executive Director (Kirsty Flanagan) 33,841 32,752 (1,089) The year to date overspend is mainly due to the timing of income in comparison to the budget profile Social Work 31,344 31,378 34 The year to date underspend can be attributed to profiling issues. Central Budgets 6,164 5,501 (663) The year to date overspend can be attributed to profiling issues. Funding (151,005) (151,005) 0 Total Net Expenditure (5,877) (7,292) (1,415) Page 22
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Further information on the departmental year to date variances is included later on in the report. 0% 25% 50% 75% 100% Chief Executive's Unit Executive Director (Kirsty Flanagan) Executive Director (Douglas Hendry) Social W ork Central Budgets TOTAL Expenditure to date against the remaining budget for each Department YTD Actual Remaining Budget Page 23
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OBJECTIVE SUMMARY – OVERALL COUNCIL POSITION AS AT 31 OCTOBER 2023 YTD Actual YTD Budget YTD Variance Variance Annual Budget Forecast Outturn Forecast Variance Variance £'000 £'000 £'000 % £'000 £'000 £'000 % Departmental Budgets Chief Executive's Unit 730 734 4 0.5% 1,134 1,134 0 0.0% Executive Director (Douglas Hendry) 73,049 73,348 299 0.4% 132,747 132,656 91 0.1% Executive Director (Kirsty Flanagan) 33,841 32,752 (1,089) (3.3%) 55,080 55,545 (465) (0.8%) Social Work 31,344 31,378 34 0.1% 76,117 76,117 0 0.0% Total Departmental Budgets 138,964 138,212 (752) (0.5%) 265,078 265,452 (374) (0.1%) Central Budgets Other Operating Income and Expenditure (1,370) (1,753) (383) 21.9% 3,921 3,921 0 0.0% Joint Boards 627 873 246 28.2% 1,496 1,496 0 0.0% Non-Controllable Costs 6,907 6,381 (526) (8.2%) 21,222 20,928 294 1.4% Total Central Budgets 6,164 5,501 (663) (12.1%) 26,639 26,345 294 1.1% TOTAL NET EXPENDITURE 145,128 143,713 (1,415) (1.0%) 291,717 291,797 (80) (0.0%) Financed By Aggregate External Finance (109,288) (109,288) 0 0.0% (226,268) (226,268) 0 0.0% Local Tax Requirement (41,717) (41,717) 0 0.0% (59,301) (59,301) 0 0.0% Contributions to General Fund 0 0 0 0.0% (1,517) (1,517) 0 0.0% Earmarked Reserves 0 0 0 0.0% (4,631) (4,631) 0 0.0% Total Funding (151,005) (151,005) 0 0.0% (291,717) (291,717) 0 0.0% (Deficit)/Surplus for Period (5,877) (7,292) (1,415) 0 80 (80) CURRENT PROJECTED FINAL OUTTURNYEAR TO DATE POSITION Page 24
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SUBJECTIVE SUMMARY – OVERALL COUNCIL POSITION AS AT 31 OCTOBER 2023 YTD Actual YTD Budget YTD Variance Variance Annual Budget Forecast Outturn Forecast Variance Variance £'000 £'000 £'000 % £'000 £'000 £'000 % Subjective Category Employee Expenses 101,005 101,662 657 0.7% 189,684 188,924 760 0.4% Premises Related Expenditure 12,069 12,104 35 0.3% 19,417 19,738 (321) (1.7%) Supplies and Services 14,752 14,499 (253) (1.7%) 24,923 25,512 (589) (2.4%) Transport Related Expenditure 7,651 7,085 (566) (8.0%) 17,654 17,536 118 0.7% Third Party Payments 92,650 90,889 (1,761) (1.9%) 173,921 175,639 (1,718) (1.0%) Capital Financing 2,359 0 (2,359) 14,523 14,523 0 0.0% TOTAL EXPENDITURE 230,486 226,239 (4,247) (1.9%) 440,122 441,872 (1,750) (0.4%) Income (236,363) (233,531) 2,832 (1.2%) (440,122) (441,792) 1,670 (0.4%) (Deficit)/Surplus for Period (5,877) (7,292) (1,415) 0 80 (80) YEAR TO DATE POSITION CURRENT PROJECTED FINAL OUTTURN YTD is year to date and represents the actual or budgeted expenditure and income for the financial year so far. Forecast Outturn is the estimate now of what expenditure or income will be for the whole of the financial year. The Variance is the difference between budget and actual or forecast outturn. A positive variance is when actual or forecast expenditure is less than budget or actual or forecast income is more than budget. A negative variance is shown in brackets and is when actual or forecast expenditure is more than budget or actual or forecast income is less than budget. Page 25
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CHIEF EXECUTIVE’S UNIT – AS AT 31 OCTOBER 2023 The department is currently forecasting spend in line with budget. The department has a year to date underspend of £0.004m (0.5%) which can be attributed to profiling issues. Forecast Outturn Position Service Annual Budget £000 Forecast Outturn £000 Current Forecast Variance £000 Previous Forecast Variance £000 Change £000 Chief Executive 1,134 1,134 0 0 0 Totals 1,134 1,134 0 0 0 Year to Date Position Key Financial Successes: • All savings options have been delivered. • The department’s 2022-23 outturn position was an underspend of £0.017m. This resulted from an overall underspend of £0.087m offset by earmarking of £0.070m due to auto-carry forwards including unspent grants and third party contributions. Key Financial Challenges: Proposed Actions to address Financial Challenges: To continue to deliver a high-quality service to support community engagement and participation. Regular monitoring, reflection and improvement cycle on service provision to ensure most efficient use of staffing and financial resources to meet national and local policy requirements for quality engagement. 0% 25% 50% 75% 100% Chief Executive Expenditure to date against the remaining budget for each Service YTD Actual £000 Remaining Budget £000 Page 26
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To continue to deliver a high quality support service function to community organisations and community planning partners during a time of challenge arising from continuing reductions in funding. Seek to work in partnership with third sector organisations such as the TSI in Argyll and Bute to efficiently deliver full package of support to community organisations. Within the partnership working of the CPP we seek to establish working groups and collate resources within this to deliver high quality solutions to identified needs. Demands for funding from community applications to the Supporting Communities Fund higher than available annual funds by about 40%. Continue to monitor fund criteria adapting this to align with priority outcomes for Argyll & Bute and continue to support groups to seek alternative sources of funding from our database of funding providers. Page 27
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CHIEF EXECUTIVE’S UNIT – OBJECTIVE SUMMARY AS AT 31 OCTOBER 2023 Service Area YTD Actual £000 YTD Budget £000 YTD Variance £000 % Variance Annual Budget £000 Forecast Outturn £000 Forecast Variance £000 % Variance Explanation Chief Executive 227 224 (3) (1.3%) 421 421 0 0.0% Outwith Reporting Criteria Community Planning & Development 503 510 7 1.4% 713 713 0 0.0% Outwith Reporting Criteria 730 734 4 0.5% 1,134 1,134 0 0.0% YTD is year to date and represents the actual or budgeted expenditure and income for the financial year so far. Forecast Outturn is the estimate now of what expenditure or income will be for the whole of the financial year. The Variance is the difference between budget and actual or forecast outturn. A positive variance is when actual or forecast expenditure is less than budget or actual or forecast income is more than budget. A negative variance is shown in brackets and is when actual or forecast expenditure is more than budget or actual or forecast income is less than budget. An explanation is given for any variance which exceeds £50,000 or 10%. Page 28
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CHIEF EXECUTIVE’S UNIT – SUBJECTIVE SUMMARY AS AT 31 OCTOBER 2023 Subjective Category YTD Actual £000 YTD Budget £000 YTD Variance £000 % Variance Annual Budget £000 Forecast Outturn £000 Forecast Variance £000 % Variance Explanation Employee 484 490 6 1.2% 901 901 0 0.0% Outwith Reporting Criteria Supplies and Services 7 7 0 0.0% 12 12 0 0.0% Outwith Reporting Criteria Transport 5 8 3 37.5% 14 14 0 0.0% Underspend on staff travel budgets. Third Party 258 246 (12) (4.9%) 254 254 0 0.0% Overspend within third sector payments with some funds due to be recouped back which will offset. Income (24) (17) 7 (41.2%) (47) (47) 0 0.0% Additional income relating to Climate Control work. Totals 730 734 4 0.5% 1,134 1,134 0 0.0% YTD is year to date and represents the actual or budgeted expenditure and income for the financial year so far. Forecast Outturn is the estimate now of what expenditure or income will be for the whole of the financial year. The Variance is the difference between budget and actual or forecast outturn. A positive variance is when actual or forecast expenditure is less than budget or actual or forecast income is more than budget. A negative variance is shown in brackets and is when actual or forecast expenditure is more than budget or actual or forecast income is less than budget. An explanation is given for any variance which exceeds £50,000 or 10%. Page 29
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CHIEF EXECUTIVE’S UNIT – RED VARIANCES AS AT 31 OCTOBER 2023 Service Area Annual Budget £000 Forecast Outturn £000 Forecast Variance £000 % Variance Explanation 0 0.0% A red variance is a forecast variance which is greater than +/- £50,000. Page 30
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EXECUTIVE DIRECTOR (DOUGLAS HENDRY) – AS AT 31 OCTOBER 2023 The department is currently forecasting an under spend of £0.091m (0.1%) which is due to slippage in the utilisation of 100 day promise funding offset by an overspend within Residential School Budgets due to a higher than budgeted demand for this service. The department has a year to date (YTD) underspend of £0.299m (0.4%). The year to date underspend position is due to the receipt of historic utility charge refunds and underspends in Education within employee budgets, these are partially offset by an over spend within the Residential Schools budget. Under the Scheme of Devolved School Management (DSM) schools are permitted flexibility at yearend, therefore no forecast variance will be processed in relation to any school underspends. Forecast Outturn Position Service Annual Budget £000 Forecast Outturn £000 Current Forecast Variance £000 Previous Forecast Variance £000 Change £000 Executive Director (Douglas Hendry) 383 383 0 0 0 Head of Commercial Services 11,574 11,574 0 0 0 Head of Education 104,795 104,704 91 91 0 Head of Legal and Regulatory Support 15,995 15,995 0 0 0 Totals 132,747 132,656 91 91 0 Year to Date Position Key Financial Successes: The 2022-23 year-end consolidated outturn position was an under spend of £2.202m after adjusting for automatic earmarking. Contributing factors included: • Effective contract management of NPDO and Hub School contracts, including a lower-than-expected insurance premium as a result of the annual renegotiation of insurance costs. • Successful negotiations with utility suppliers achieved both historic water charge refunds and ongoing reductions to water rates. 0% 25% 50% 75% 100% Executive Director (Douglas Hendry) Head of Commercial Services Head of Education Head of Legal and Regulatory Support Expenditure to date against the remaining budget for each Service YTD Actual £000 Remaining Budget £000 Page 31
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• Implementation of NDEEF project resulting in recurring annual saving in utilities and a significant contribution to meeting Net Zero targets. • Income generation within Early Years. • Increased rental income within One Council Property. Key Financial Challenges: Proposed Actions to address Financial Challenges: The legacy impact of COVID-19 on our young learners has led to an increased demand on the additional support need functions of the Education Service in response to the growing health and wellbeing needs of our young people and their families. Analysis and review of delivery models, robust costings of any service redesign required and continual monitoring of associated budgets Impact of the current cost of living crisis on the cost of the school day for learners and their families. Work with schools to ensure effective use of PEF to close the poverty related attainment gap and identify other funding sources to ensure equity of experience for all children. Impact of the current cost of living crisis on uptake in demand led service areas like catering, design services and licensing. Continually refine/develop systems to accurately forecast outturns and the impact on the future financial outlook. Strategies in place to redesign services in line with future demand. Ensure that Catering and Cleaning Services remain efficient and effective given the requirement to increase free school meal provision for P6/7 and Early Years, the impact of high inflation on produce and a requirement to adhere to the Statutory Guidance supporting Nutritional Requirements for Food and Drink in Schools (Scotland) Regulations 2020. Support a longer-term service re-design project, including collaborative working with partners and cross department support with implementation of revised service delivery models. Continual monitoring and review of costs and budgets, ensuring that any efficiencies and savings are secured for the Council Manage delivery of legislative/policy requirements that may not be fully funded by Scottish Government therefore placing additional burdens on the Council, for example, expansion of Universal Free School Meals for P6 and 7s. Analysis of new obligations and whether they incur additional costs not met through increased funding allocations. Work will be designed and implemented in the most effective way within resource availability. The Council has a requirement to deliver 1140 hours of Early Learning and Childcare (ELC). The ring-fenced grant was reduced in 2022-23 and again this year, reducing funding by £1.478m. Robust service costings, financial monitoring and timely reporting to ensure the service can be delivered within the financial resources available. Medium term forecasting on population to shape ongoing service redesign. Analysis of potential to extend income generation using “spare” capacity to trial paid care for under 2’s Impact of high inflationary uplifts within the NPDO/HUB School contracts. Ensuring continued effective contract management of NPDO/HUB Schools to minimise the impact of high inflationary uplifts. Page 32
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EXECUTIVE DIRECTOR (DOUGLAS HENDRY) – OBJECTIVE SUMMARY AS AT 31 OCTOBER 2023 Service Service Area YTD Actual £000 YTD Budget £000 YTD Variance £000 % Variance Annual Budget £000 Forecast Outturn £000 Forecast Variance £000 % Variance Explanation Executive Director (Douglas Hendry) Central/Management Costs 209 215 6 2.8% 383 383 0 0.0% Outwith Reporting Criteria 209 215 6 2.8% 383 383 0 0.0% Head of Commercial Services Catering 426 430 4 0.9% 1,265 1,265 0 0.0% Outwith Reporting Criteria Head of Commercial Services Central/Management Costs 876 799 (77) (9.6%) 1,761 1,761 0 0.0% The YTD overspend is due to profiling and earmarkings to be drawn down within Period Products and Estates. Head of Commercial Services CHORD 80 59 (21) (35.6%) 63 63 0 0.0% The YTD overspend is due to the timing of recharges to capital. Head of Commercial Services Cleaning (71) 114 185 162.3% 481 481 0 0.0% The YTD underspend is due to the timing of recharges for cleaning and the reduced use of bank staff. Head of Commercial Services Culture, Heritage, Recreation & Sport 3,441 3,395 (46) (1.4%) 5,915 5,915 0 0.0% Outwith Reporting Criteria Head of Commercial Services Events & Commercial Catering 167 (4) (171) 4275.0% 3 3 0 0.0% The YTD overspend is due to the under recovery of income and high staff costs within Commercial Cafés and Events. Head of Commercial Services Property Portfolio (155) (102) 53 (52.0%) (191) (191) 0 0.0% The YTD underspend is due to the timing of One Council Property income. Head of Commercial Services Property Services 622 700 78 11.1% 769 769 0 0.0% The YTD underspend is due to the receipt of historic water charge refunds offset slightly by the profile of income from Renewable Energy. Head of Commercial Services Shared Offices 670 659 (11) (1.7%) 1,508 1,508 0 0.0% Outwith Reporting Criteria 6,056 6,050 (6) (0.1%) 11,574 11,574 0 0.0% Page 33
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Head of Education Additional Support for Learning 5,902 5,972 70 1.2% 11,470 11,470 0 0.0% Outwith Reporting Criteria Head of Education Central/Management Costs 1,365 1,307 (58) (4.4%) 2,328 2,328 0 0.0% The YTD overspend is due to overspends in Licence fees, offset by underspends elsewhere within the service. Head of Education Community Learning & Development 3 2 (1) (50.0%) 13 13 0 0.0% The YTD overspend is in the Central Repairs Account (CRA) which is managed across the Service and is profile related. Head of Education COVID 91 100 9 9.0% 136 136 0 0.0% Outwith Reporting Criteria Head of Education Early Learning & Childcare 1,810 1,964 154 7.8% 9,722 9,722 0 0.0% The main contributing factor to the YTD underspend is delays in recruitment and an over-recovery of sick pay within ELC settings. This is partially offset by a YTD overspend in the 1140 Hours budget which will be rectified through earmarking drawdowns. Head of Education Primary Education 22,891 22,551 (340) (1.5%) 38,311 38,311 0 0.0% There is a YTD overspend within employee budgets for which the Mid Year Allocations will be processed in November to align teacher budgets with the new staffing entitlements from August and also within school meals for which budget adjustments will be processed for Free School Meals and earmarkings drawn down. Adjustments will also be processed in November to reallocate Teacher Cover costs. There is also a YTD overspend for school adaptations/maintenance and budget requires to be identified from within the service to cover this. The above overspends are partially offset by a YTD underspend in PEF budgets which is profile-related. Head of Education Pupil Support 1,472 1,379 (93) (6.7%) 2,636 2,945 (309) (11.7%) The YTD overspend in the Schools Residential Budget is due to a higher demand for Page 34
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service than budget allows. A forecast variance of £309k has been recorded through the ledger reflecting this position. This YTD overspend is partially offset by underspends in Psychological Service, Investing in the Wellbeing of our Young People and Community Mental Health and Wellbeing, which are all profile-related. Head of Education Schools - Central Services 1,067 1,045 (22) (2.1%) 2,392 1,992 400 16.7% Outwith Reporting Criteria Head of Education Secondary Education 22,303 22,579 276 1.2% 37,787 37,787 0 0.0% The YTD underspend is primarily within the staffing budgets. The Mid Year Allocations will be processed in November to align teacher budgets with the new staffing entitlements from August. Adjustments will also be processed in November to reallocate Teacher Cover costs. There is a YTD overspend of £177k in Secondary HQ which is mainly due to repairs and maintenance expenditure. Budget requires to be identified from within the service to cover this pressure. There is also an under-recovery of school meals income which is profile-related. 56,904 56,899 (5) (0.0%) 104,795 104,704 91 0.1% Head of Legal & Regulatory Support Central/Management Costs 137 138 1 0.7% 271 271 0 0.0% Outwith Reporting Criteria Head of Legal & Regulatory Support Community Safety 95 95 0 0.0% 185 185 0 0.0% Outwith Reporting Criteria Head of Legal & Regulatory Support Elections 9 9 0 0.0% 37 37 0 0.0% Outwith Reporting Criteria Head of Legal & Regulatory Support Governance 278 284 6 2.1% 739 739 0 0.0% Outwith Reporting Criteria Page 35
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Head of Legal & Regulatory Support Governance, Risk & Safety 293 308 15 4.9% 581 581 0 0.0% Outwith Reporting Criteria Head of Legal & Regulatory Support Legal Services 206 224 18 8.0% 749 749 0 0.0% Outwith Reporting Criteria Head of Legal & Regulatory Support NPDO and Hub Schools 7,987 8,133 146 1.8% 11,489 11,489 0 0.0% The YTD underspend is due to receipt of historic water charge refunds and the timing of income and expenditure. Head of Legal & Regulatory Support Procurement, Commercial and Contract Management 549 640 91 14.2% 1,253 1,253 0 0.0% The YTD underspend is due to delays in recruitment of staff and the timing of income and expenditure. Head of Legal & Regulatory Support Trading Standards & Advice Services 326 353 27 7.7% 691 691 0 0.0% Outwith Reporting Criteria 9,880 10,184 304 3.0% 15,995 15,995 0 0.0% 73,049 73,348 299 0.4% 132,747 132,656 91 0.1% YTD is year to date and represents the actual or budgeted expenditure and income for the financial year so far. Forecast Outturn is the estimate now of what expenditure or income will be for the whole of the financial year. The Variance is the difference between budget and actual or forecast outturn. A positive variance is when actual or forecast expenditure is less than budget or actual or forecast income is more than budget. A negative variance is shown in brackets and is when actual or forecast expenditure is more than budget or actual or forecast income is less than budget. An explanation is given for any variance which exceeds £50,000 or 10%. Page 36
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EXECUTIVE DIRECTOR (DOUGLAS HENDRY) – SUBJECTIVE SUMMARY AS AT 31 OCTOBER 2023 Subjective Category YTD Actual £000 YTD Budget £000 YTD Variance £000 % Variance Annual Budget £000 Forecast Outturn £000 Forecast Variance £000 % Variance Explanation Employee 57,329 58,305 976 1.7% 106,063 105,663 400 0.4% Non-Education: The YTD underspend of £261k is made up of a £138k underspend in Legal and Regulatory Support due to delays in recruitment and a £123k underspend in Commercial Services due to delays in recruitment and lower than anticipated use of bank budgets in catering and cleaning. Education: The £715k YTD underspend is mainly within staffing budgets in ELC settings, Secondary Schools and Learning Centres. Under the Scheme of Devolved School Management (DSM) schools are permitted flexibility at year end, therefore no forecast variance will be processed in relation to any remaining underspend. Premises 4,719 4,560 (159) (3.5%) 8,208 8,208 0 0.0% Non Education: The YTD underspend of £226k is largely due to historic water charge refunds and profiling of CRA and grounds maintenance budgets. Education: The £385k overspend is mainly due to repairs and maintenance costs within schools and capital costs relating to 1140 Hours expansion - £35k from earmarked reserves will be drawn down to cover a proportion of this and £80k requires to be transferred to Capital. Supplies and Services 6,818 7,306 488 6.7% 13,154 13,154 0 0.0% Non Education: The YTD underspend of £62k is mainly within Catering Services and is due to profiling of catering purchases budgets. Education: The £426k underspend is mainly due to underspends in PEF due to profiling and school budgets. Under the Scheme of Devolved School Management (DSM) schools are permitted flexibility at year end, therefore no forecast variance has been processed in relation to this. Transport 228 190 (38) (20.0%) 343 343 0 0.0% Non Education: Outwith Reporting Criteria. Education: The £35k YTD overspend is due to small overspends across a wide range of both ELC, School and Central cost centres. These are profile-related and the budget will be refined in the November period. Third Party 25,668 25,490 (178) (0.7%) 41,999 42,308 (309) (0.7%) Non Education: The YTD overspend of £68k is largely due to the timing of large payments in respect of NPDO/Hub contracts and the timing of recharges. Education: The YTD overspend of £110k is due to increased demand within Schools Residential Accommodation. Page 37
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Income (21,713) (22,503) (790) 3.5% (37,020) (37,020) 0 0.0% Non Education: The YTD under-recovery of income of £174k is due to the timing of income within Renewable Energy and school catering recharges and under-recovery of income within Commercial Events and Cafes. Education: The under-recovery of income of £616k is due to the profile of income from school meals. Totals 73,049 73,348 299 0.4% 132,747 132,656 91 0.1% YTD is year to date and represents the actual or budgeted expenditure and income for the financial year so far. Forecast Outturn is the estimate now of what expenditure or income will be for the whole of the financial year. The Variance is the difference between budget and actual or forecast outturn. A positive variance is when actual or forecast expenditure is less than budget or actual or forecast income is more than budget. A negative variance is shown in brackets and is when actual or forecast expenditure is more than budget or actual or forecast income is less than budget. An explanation is given for any variance which exceeds £50,000 or 10%. Page 38
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EXECUTIVE DIRECTOR (DOUGLAS HENDRY) – RED VARIANCES AS AT 31 OCTOBER 2023 Service Area Annual Budget £000 Forecast Outturn £000 Forecast Variance £000 % Variance Explanation Education - Pupil Support 2,633 2,942 (309) (11.7%) Higher than budgeted demand for placements within Residential Schools. Education - Schools Central Services 2,341 1,941 400 17.1% Slippage in the use of 100 day promise funding for additional teachers and support staff that will be fully utilised in 2024-25. A red variance is a forecast variance which is greater than +/- £50,000. Page 39
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EXECUTIVE DIRECTOR (KIRSTY FLANAGAN) – AS AT 31 OCTOBER 2023 The department has a forecast overspend of £0.465m (0.8%). This is due to an under-recovery of income in Piers & Harbours as a result of a reduced number of berthings, in Public Conveniences due to the delayed installation of turnstiles and on TROs in Roads. This is combined with overspends on Pupil Transport driver/escort costs, Scottish Welfare Fund Community Care and Crisis Grants, Street Lighting Maintenance, staff costs in Amenities due to high sickness and turnover and an unachievable saving in relation to Depot Rationalisation. These are partially offset by an over-recovery of vacancy savings, an underspend in Public Transport payments to operators and an underspend in training for A&B Manager courses. The department has a year to date overspend of £1.089m (3.3%). This is mainly due a delay in grant income from Transport Scotland in Ferries and an under-recovery of berthing income in Piers and Harbours. Forecast Outturn Position Service Annual Budget £000 Forecast Outturn £000 Current Forecast Variance £000 Previous Forecast Variance £000 Change £000 Executive Director (Kirsty Flanagan) 201 (355) 556 556 0 Head of Customer Support Services 9,014 8,984 30 0 30 Head of Development and Economic Growth 8,113 8,113 0 0 0 Head of Financial Services 5,828 6,038 (210) (210) 0 Head of Roads and Infrastructure Services 31,924 32,765 (841) (728) (113) Totals 55,080 55,545 (465) (382) (83) Year to Date Position 0% 25% 50% 75% 100% Executive Director (Kirsty Flanagan) Head of Customer Support Services Head of Development and Economic Growth Head of Financial Services Head of Roads and Infrastructure Services Expenditure to date against the remaining budget for each Service YTD Actual £000 Remaining Budget £000 Page 40
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Key Financial Successes: During 2022-23 the department had an over-recovery of Planning Fee and Building Warrant income, an over-recovery of NDR commission due to a successful debt recovery campaign during the year (which focussed on high level debts), plus an over recovery of vacancy savings. Key Financial Challenges: Proposed Actions to address Financial Challenges: Ensuring that services spend to budget and do not overspend after the department had an overspend of £1.5m after automatic earmarkings in 2022-23. Detailed monitoring in the key areas overspent in 2022-23 to flag up concerns early and mitigate before becoming an overspend. Department / Service ongoing ability to meet future savings / efficiency requirements. Monitoring of trends / expenditure levels / service configuration and the Service Packages Policy Options savings process. Rising cost of materials, software and consultancy services across the service will result in a reduction in activity or overspends. Costs are monitored regularly and contained as much as possible, with any unavoidable overspends highlighted as soon as known. Financial Services to continue to deliver a high-quality support service function during a time of substantial uncertainty and challenge arising from continuing reductions in funding whilst costs are increasing due to ongoing high levels of inflation and service demand caused by world events. Ensure the team is operating as efficiently and effectively as possible by building resilience across the team and working collaboratively with other services of the Council to support evidence-based decision making. Carry out the improvements identified during the Revenue and Benefits Business Process Review to maximise income generation and deliver efficiencies in service provision. Winter Maintenance costs are difficult to estimate as they are very much dependant on the weather. Close monitoring of Winter Maintenance activity and reporting of the financial implications through the budget monitoring process. The Council agreed the winter policy, setting out the intervention level and locations to be treated. The number of treatments is determined by weather conditions. The current budget provision provides for 58 full equivalent runs. There is a sophisticated weather monitoring system in place consisting of several weather stations, this is supported by a forecasting and meteorological service which is collaboratively procured by West of Scotland local authorities. Page 41
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Dangerous buildings costs as there is no budget for this expenditure and the council has no control over the demand for the service. Building Standards, Legal Services and Financial Services are working closely to manage debt recovery and to consider other options to minimise corporate risk exposure. Due to the nature of the various components of Waste Management there are ongoing challenges with: • The introduction of the Deposit Return Scheme • Uncertainty with recycling income/ gate fee costs due to the volatility of the market • Challenges in the legislative changes around the disposal of Biodegradable Municipal Waste To closely monitor all service components of Waste Management and review the Waste Strategy in conjunction with our contractual partner Renewi (previously Shanks). Page 42
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EXECUTIVE DIRECTOR (KIRSTY FLANAGAN) – OBJECTIVE SUMMARY AS AT 31 OCTOBER 2023 Service Service Area YTD Actual £000 YTD Budget £000 YTD Variance £000 % Variance Annual Budget £000 Forecast Outturn £000 Forecast Variance £000 % Variance Explanation Executive Director (Kirsty Flanagan) Central/Management Costs 165 84 (81) (96.4%) 201 (355) 556 276.6% Based on the YTD vacancy savings recovered, it is currently anticipated that an over recovery is likely to be achieved in the region of £400K. There is also a forecast underspend due to the receipt of funding for ferries previously funded internally of £156k. 165 84 (81) (96.4%) 201 (355) 556 276.6% Head of Customer Support Services Central/Management Costs 82 99 17 17.2% 174 174 0 0.0% Underspend on payments to other bodies due to the timing of payments. Head of Customer Support Services Communications 138 172 34 19.8% 324 324 0 0.0% Underspend in employee costs due to vacancies which will be used to cover future consultancy costs. Head of Customer Support Services Customer Service Centres 808 753 (55) (7.3%) 1,474 1,474 0 0.0% Under-recovery on charges to departments for printing and mail. Head of Customer Support Services HR 1,387 1,420 33 2.3% 2,678 2,648 30 1.1% Underspend in training costs due to A&B Manager not currently being run. Head of Customer Support Services ICT 2,305 2,336 31 1.3% 4,308 4,308 0 0.0% Outwith Reporting Criteria. Head of Customer Support Services Registrars (17) 10 27 270.0% 56 56 0 0.0% Underspend due to staff vacancies. 4,703 4,790 87 1.8% 9,014 8,984 30 0.3% Head of Development & Economic Growth Airports 689 707 18 2.6% 1,210 1,210 0 0.0% Outwith Reporting Criteria. Head of Development & Economic Growth Building Control (147) (145) 2 (1.4%) (124) (124) 0 0.0% Outwith Reporting Criteria. Page 43
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Head of Development & Economic Growth Central/Management Costs 292 294 2 0.7% 579 579 0 0.0% Outwith Reporting Criteria. Head of Development & Economic Growth Culture & Heritage 109 116 7 6.0% 228 228 0 0.0% Outwith Reporting Criteria. Head of Development & Economic Growth Development Management (42) (114) (72) 63.2% (25) (25) 0 0.0% Overspend is due to overspends on employee and agency expenditure combined with the timing of receipts for planning income received. Schedule of expected Planning Applications to be reviewed to determine any potential for the over-recovery of income. Head of Development & Economic Growth Development Policy 210 207 (3) (1.5%) 392 392 0 0.0% Outwith Reporting Criteria. Head of Development & Economic Growth Economic Development 923 984 61 6.2% 1,179 1,179 0 0.0% Underspend is due to grant income received in advance of expenditure which is offset against expenditure that requires draw down from earmarked reserves. Head of Development & Economic Growth Environmental Health 619 508 (111) (21.9%) 1,213 1,213 0 0.0% Overspend is due to a delay in receiving Private Water Grant income which will be received later in the year. Head of Development & Economic Growth Environmental Initiatives 64 63 (1) (1.6%) 120 120 0 0.0% Outwith Reporting Criteria. Head of Development & Economic Growth Housing 2,786 2,716 (70) (2.6%) 3,105 3,105 0 0.0% Overspend in Temporary Accommodation costs. Projection will be looked at to determine impact for remainder of the year. Head of Development & Economic Growth Private Landlords (354) 0 354 0.0% 0 0 0 0.0% Underspend is due to income for Private Landlord Registration fees received against a zero budget. Head of Development & Economic Growth Transportation Policy 295 125 (170) (136.0%) 236 236 0 0.0% Overspend is due to expenditure for SUSTRANS and CWSR Page 44
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incurred in advance of grant claim. 5,444 5,461 17 0.3% 8,113 8,113 0 0.0% Head of Financial Services Accounting & Budgeting 1,403 1,408 5 0.4% 2,671 2,671 0 0.0% Outwith Reporting Criteria. Head of Financial Services Internal Audit & Fraud 176 180 4 2.2% 339 339 0 0.0% Outwith Reporting Criteria. Head of Financial Services Revenues & Benefits 1,829 1,917 88 4.6% 2,123 2,123 0 0.0% Underspend is due to income received ahead of profile within Housing Benefits Head of Financial Services Scottish Welfare Fund 306 307 1 0.3% 695 905 (210) (30.2%) Projected overspend in relation to Scottish Welfare Fund Community Care and Crisis Grants. 3,714 3,812 98 2.6% 5,828 6,038 (210) (3.6%) Head of Roads & Infrastructure Services Amenity 2,512 2,295 (217) (9.5%) 3,240 3,393 (153) (4.7%) Forecast variance relates to overspend across amenities for use of roads staff to cover vacancies and sickness (£85K), under-recovery of hire of facilities income (£28K) and public convenience income due to delay with fitting of door charging mechanism (£40K). There is also an overspend currently in Parks CRA, no forecast variance entered to date pending proposed CRA spend across RIS. Income budget profile out of alignment with actual expected income for Cemeteries and Crematoria, difficult to profile due to the nature of the income Head of Roads & Infrastructure Services Car Parking (335) (358) (23) 6.4% (582) (582) 0 0.0% Outwith Reporting Criteria. Head of Roads & Infrastructure Services Central/Management Costs 1,804 1,738 (66) (3.8%) 3,006 3,006 0 0.0% Overspend is due to the profile of the income budget which will be rectified by the end of the year. Page 45
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Head of Roads & Infrastructure Services Depots 207 183 (24) (13.1%) (429) (321) (108) 25.2% Delay in rental income and timing of expenditure causing small overspend which will be rectified over the financial year. Forecast variance due to saving for Depot Rationalisation no longer being achievable in year. Head of Roads & Infrastructure Services Fleet & Transport 5,365 4,948 (417) (8.4%) 8,680 8,722 (42) (0.5%) Overspend due to the timing of Fleet recharges to other services. Forecast variance for overspend for additional Pupil Transport costs which is partially offset against an underspend in Public Transport due to a reduction in payments to operators. Head of Roads & Infrastructure Services Infrastructure 313 391 78 20.0% 763 763 0 0.0% Underspend due to the timing of Flood and Coastal Protection works which will be rectified over the financial year. Head of Roads & Infrastructure Services Marine (2,464) (4,167) (1,703) 40.9% (4,215) (3,815) (400) 9.5% YTD variance higher than projection due to timing of cash flow in comparison to profiling of budget and delay in receiving grant from Transport Scotland. Forecast overspend due to the under-recovery of income from Berthing charges. Head of Roads & Infrastructure Services Network & Traffic Management 137 43 (94) (218.6%) 147 197 (50) (34.0%) Forecast overspend due to the under recovery of TRO income based on current shortfalls in income to date and prior years' total income. Head of Roads & Infrastructure Services Road Safety 58 65 7 10.8% 98 98 0 0.0% Small underspend due to the timing of PPE purchases. Head of Roads & Infrastructure Services Roads & Lighting 6,085 7,359 1,274 17.3% 7,092 7,180 (88) (1.2%) YTD underspend due to the timing of income in comparison to the profiling of the budget, mainly due to recharges made to capital jobs, which will be rectified over the financial year. Forecast variance for overspend in Street Lighting. This is due to increased levels of maintenance Page 46
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required to meet the service's responsibilities. Head of Roads & Infrastructure Services Waste 6,133 6,108 (25) (0.4%) 14,124 14,124 0 0.0% Outwith Reporting Criteria. 19,815 18,605 (1,210) (6.5%) 31,924 32,765 (841) (2.6%) 33,841 32,752 (1,089) (3.3%) 55,080 55,545 (465) (0.8%) YTD is year to date and represents the actual or budgeted expenditure and income for the financial year so far. Forecast Outturn is the estimate now of what expenditure or income will be for the whole of the financial year. The Variance is the difference between budget and actual or forecast outturn. A positive variance is when actual or forecast expenditure is less than budget or actual or forecast income is more than budget. A negative variance is shown in brackets and is when actual or forecast expenditure is more than budget or actual or forecast income is less than budget. An explanation is given for any variance which exceeds £50,000 or 10%. Page 47
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EXECUTIVE DIRECTOR (KIRSTY FLANAGAN) – SUBJECTIVE SUMMARY AS AT 31 OCTOBER 2023 Subjective Category YTD Actual £000 YTD Budget £000 YTD Variance £000 % Variance Annual Budget £000 Forecast Outturn £000 Forecast Variance £000 % Variance Explanation Employee 22,541 22,764 223 1.0% 43,793 43,505 288 0.7% Underspend across services due to vacancies and long term absences. Main underspends relate to Infrastructure, Roads & Lighting and HR. As per last month, the HR underspend will be used to offset overspends elsewhere in the service. The forecast underspend relates to an over-recovery of vacancy savings, underspend on Staff Training Course Fees and additional funding received for ferries all partially offset by overspends in Pupil Transport and Depot costs due to a saving not being achieved in year. Premises 1,537 1,731 194 11.2% 3,447 3,447 0 0.0% Underspend relates mainly to profiling of Depot Apportionment and Street Lighting Electricity partially offset by overspends on Refuse Collection due to budget profiling. Supplies and Services 5,996 5,496 (500) (9.1%) 8,861 8,861 0 0.0% Overspend relates to Economic Development for expenditure that is funded from grant income and System Development - Maintenance/Development of Computer Software. Transport 7,042 6,476 (566) (8.7%) 16,243 16,243 0 0.0% Overspend for vehicle repairs and maintenance in Fleet, which will be partially offset against additional income for recharges to the services. Third Party 35,206 33,227 (1,979) (6.0%) 63,600 63,835 (235) (0.4%) Overspend within Economic Development and Housing for expenditure that is funded from grant income. Forecast variance relates to overspends in Street Lighting for maintenance costs and on Scottish Welfare Fund Community Care and Crisis Grants. These are partially offset by underspends in Public Transport payments to bus Operators. Capital Financing 0 0 0 0.0% 2,398 2,398 0 0.0% Outwith Reporting Criteria. Income (38,481) (36,942) 1,539 (4.2%) (83,262) (82,744) (518) 0.6% Timing of income in comparison to profiling of budget in Roads, mainly due to recharges made to capital jobs, which will be rectified over the financial year and unbudgeted income in Economic Development and Housing, which will fund expenditure throughout the year. These are partially offset by overspends in Revenues & Benefits, due to timing of cashflows, and an under-recovery of income from Berthing charges in Piers and Harbours. Forecast variance relates to the under-recovery on income in Piers and Harbour for Berthing, on Public Conveniences and on income from TROs. Totals 33,841 32,752 (1,089) (3.3%) 55,080 55,545 (465) (0.8%) Page 48
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YTD is year to date and represents the actual or budgeted expenditure and income for the financial year so far. Forecast Outturn is the estimate now of what expenditure or income will be for the whole of the financial year. The Variance is the difference between budget and actual or forecast outturn. A positive variance is when actual or forecast expenditure is less than budget or actual or forecast income is more than budget. A negative variance is shown in brackets and is when actual or forecast expenditure is more than budget or actual or forecast income is less than budget. An explanation is given for any variance which exceeds £50,000 or 10%. Page 49
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EXECUTIVE DIRECTOR (KIRSTY FLANAGAN) – RED VARIANCES AS AT 31 OCTOBER 2023 Service Area Annual Budget £000 Forecast Outturn £000 Forecast Variance £000 % Variance Explanation Vacancy Savings (251) (651) 400 (159.4%) Over-recovery of vacancy savings. Public Transport 5,266 5,118 148 2.8% Underspend in Operator Payments. Pupil Transport 1,020 1,210 (190) (18.6%) Overspend in transport costs for drivers/escorts. Piers & Harbours (1,839) (1,439) (400) 21.8% Under-recovery of income from Berthing charges. Street Lighting 262 350 (88) (33.6%) Overspend on maintenance costs. Traffic Regulation Orders (110) (60) (50) 45.5% Under-recovery of income from Traffic Regulation Orders. Scottish Welfare Fund 394 579 (185) (47.0%) Overspend in relation to Scottish Welfare Fund Community Care and Crisis Grants. Depots (108) 0 (108) 100.0% Proposed saving for Depot Rationalisation no longer being achievable in year. Central Management Costs 48 (108) 156 325.0% Underspend due to receipt of funding for ferries previously funded internally. A red variance is a forecast variance which is greater than +/- £50,000. Page 50
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SOCIAL WORK – AS AT 31 OCTOBER 2023 The department is currently forecasting to break even at the end of the financial year. This is due to a combination of the over-recovery of vacancy savings, income from fees, charges and recharges and the use of non-recurring reserves to offset cost pressures due to high demand for services and the use of agency staff to fill staffing recruitment and retention gaps across Adult Services. The department has a year to date overspend of £0.034m (0.1%) which is mainly due to the use of agency staff across Homecare and Older People Residential Units in Adult Services. Forecast Outturn Position Service Annual Budget £000 Forecast Outturn £000 Current Forecast Variance £000 Previous Forecast Variance £000 Change £000 Chief Officer Integration 135 (334) 469 475 (6) Head of Strategic Planning and Performance 482 472 10 9 1 Head of Health and Community Care 39,192 40,695 (1,503) (1,186) (317) Head of Acute and Complex Care 19,872 19,434 438 327 111 Head of Children and Families 16,436 15,850 586 375 211 Totals 76,117 76,117 0 0 0 Year to Date Position Key Financial Successes: Delivered an underspend of £3.556m at the end of 2022/23 after automatic earmarkings of £1.078m. The total underspend of £4.634m has been transferred to IJB reserves and should allow for future investment and transformation across Social Work. -60% -35% -10% 15% 40% 65% 90% 115% Chief Officer Integration Head of Adult Services Head of Children and Families Head of Strategic Planning and Performance Expenditure to date against the remaining budget for each Service YTD Actual £000 Remaining Budget £000 Page 51
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Key Financial Challenges: Proposed Actions to address Financial Challenges: Deliver the outstanding savings total for 2023/24 of £0.690m (as at October 2023). Maintain a close working relationship with the HSCP Service Improvement Team to quickly and efficiently identify and assess options for delivering the outstanding savings. Development and delivery of future service redesigns which will be necessary to contain service expenditure within the allocated resource, noting that in year savings still need to be identified for 23/24 to address the 23/24 budget gap, as well as budget gaps in future years. Support from finance to assist strategic managers to develop and identify further savings and to look beyond the short term to identify and plan the changes which will be needed to address the expected ongoing budget challenges over the current, and future, years. Use of agency staff to support service delivery across Social Work, but particularly in Older People services, due to recruitment and retention challenges within the service. Year to date spend at October 2023 of £1.696m. Close working relationship with the HSCP to support the costing of a plan to stabilise the service and ensure it is operationally and financially sustainable. This includes an exit plan from the reliance on agency staff. Cost of living crisis affecting pay inflation negotiations and financial sustainability of service providers, which could affect affordability and sustainability of service delivery. Ensure emerging issues are highlighted as soon as possible so that the financial impact can be evaluated and reported through the budget monitoring and preparation processes. Page 52
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SOCIAL WORK – OBJECTIVE SUMMARY AS AT 31 OCTOBER 2023 Service Service Area YTD Actual £000 YTD Budget £000 YTD Variance £000 % Variance Annual Budget £000 Forecast Outturn £000 Forecast Variance £000 % Variance Explanation Chief Officer Integration Integration Headquarters 219 268 49 18.3% 569 560 9 1.6% The YTD variance is as a result of the timing of planned payments to NHS. The forecast variance is outwith reporting criteria. Chief Officer Integration Social Work Central Support (962) (717) 245 (34.2%) (434) (894) 460 (106.0%) The YTD variance is due to over-recovery on vacancy savings (£190k) combined with underspends on centrally held funding. The forecast underspend is due to an over- recovery on vacancy savings (£278k) combined with underspends on centrally held funds, printing & stationery and postages. (743) (449) 294 (15.9%) 135 (334) 469 (104.4%) Head of Strategic Planning & Performance Management & Central Costs 228 225 (3) (1.3%) 448 450 (2) (0.4%) Outwith reporting criteria. Head of Strategic Planning & Performance Service Development 14 19 5 26.3% 34 22 12 35.3% The YTD and forecast variances are due to staff vacancies giving both a payroll underspend and an under-recovery on Charges to Health Boards. 242 244 2 25.0% 482 472 10 34.8% Head of Health and Community Care Management & Central Costs 303 468 165 35.3% 1,467 1,120 347 23.7% The YTD variance is mainly due to YTD underspends on centrally held funds. The forecast underspend is mainly due to underspends on centrally held funds and staff vacancies. Head of Health and Community Care Older People 17,234 16,170 (1,064) (6.6%) 37,725 39,575 (1,850) (4.9%) The YTD variance reflects demand within the care home placement budget and YTD overspends on employee costs due to the use of agency staff in residential units and homecare. The forecast overspend reflects demand driven overspends within the care home placement budgets and homecare. High staff costs across HSCP residential units due to agency cover are also contributing to the forecast overspend. These overspends are partially offset by staffing underspends across ACM teams and internal residential units. 17,537 16,638 (899) (5.4%) 39,192 40,695 (1,503) (3.8%) Page 53
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Head of Acute and Complex Care Learning Disabilities 4,037 4,416 379 8.6% 14,217 13,617 600 4.2% The YTD variance reflects demand for residential placements partially offset by demand for supported living. The forecast underspend reflects known demand for Residential Placements partially offset by overspends on Supported Living and Respite due to demand. Head of Acute and Complex Care Management & Central Costs 48 71 23 32.4% 130 101 29 22.3% Both the YTD and forecast variances are due to underspends in areas such as printing and stationary, travel and payments to other bodies. Head of Acute and Complex Care Mental Health 766 735 (31) (4.2%) 2,726 2,794 (68) (2.5%) The YTD variance is outwith reporting criteria. The forecast overspend reflects higher than budgeted demand for services in Supported Living (£91k) and Residential Placements (£104k). These are partially offset by an underspend on the addictions service and assessment and care management due to staff vacancies. Head of Acute and Complex Care Physical Disability 1,241 1,181 (60) (5.1%) 2,799 2,922 (123) (4.4%) The YTD variance reflects demand for service within the supported living budgets and overspends on purchases within the Integrated Equipment Store. This is partially offset by underspends in the residential budget. The forecast overspend reflects higher than budgeted demand for Supported Living (£103k), Respite (£9k) and higher than budgeted equipment purchasing in the Integrated Equipment Service (£15k). These are offset slightly by a forecast underspends in the Residential Care and ACM Budgets. 6,092 6,403 311 31.7% 19,872 19,434 438 19.6% Head of Children & Families Child Protection 1,695 1,817 122 6.7% 3,674 3,393 281 7.6% The YTD variance is as a result of payroll underspends due to vacancies as well as underspends on travel and subsistence combined with demand for services across contact & welfare. The forecast underspend is as a result of demand for contact and welfare services as well as forecast underspends in the Area Teams on payroll costs, payments to other bodies, travel and subsistence. Head of Children & Families Children with a Disability 539 476 (63) (13.2%) 984 1,027 (43) (4.4%) The YTD variance reflects demand for service. The forecast variance is outwith reporting criteria. Page 54
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Head of Children & Families Criminal Justice 79 198 119 60.1% 224 110 114 50.9% The YTD variance is a result of payroll underspends due to vacancies combined with underspends on payments to other bodies. The forecast underspend is due to vacancies within the Criminal Justice team. Head of Children & Families Looked After Children 4,201 4,315 114 2.6% 7,836 7,631 205 2.6% The YTD variance is a result of demand for fostering, kinship and adoption placements as well as the YTD over-recovery of income for the provision of nursery meals. This is combined with payroll underspends due to vacancies and long term absence. The forecast underspend is a result of demand for fostering, kinship and adoption placements as well as on supporting young people leaving care. There is also an over-recovery on income from the Home Office for unaccompanied asylum seeking children. This is all partially offset by demand for external residential placements and payroll overspends in the children's houses. Head of Children & Families Management & Central Costs 1,702 1,736 34 2.0% 3,718 3,689 29 0.8% Outwith reporting criteria. 8,216 8,542 326 3.8% 16,436 15,850 586 3.6% GRAND TOTAL 31,344 31,378 34 0.1% 76,117 76,117 0 0.0% YTD is year to date and represents the actual or budgeted expenditure and income for the financial year so far. Forecast Outturn is the estimate now of what expenditure or income will be for the whole of the financial year. The Variance is the difference between budget and actual or forecast outturn. A positive variance is when actual or forecast expenditure is less than budget or actual or forecast income is more than budget. A negative variance is shown in brackets and is when actual or forecast expenditure is more than budget or actual or forecast income is less than budget. An explanation is given for any variance which exceeds £50,000 or 10%. Page 55
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SOCIAL WORK – SUBJECTIVE SUMMARY AS AT 31 OCTOBER 2023 Subjective Category YTD Actual £000 YTD Budget £000 YTD Variance £000 % Variance Annual Budget £000 Forecast Outturn £000 Forecast Variance £000 % Variance Explanation Employee 18,826 18,306 (520) (2.8%) 34,745 34,673 72 0.2% The YTD overspend is due to the use of agency staff across the HSCP (£1.7m YTD variance; £2.5m forecast), partially offset by the over-recovery on vacancy savings and payroll underspends due to vacancies. The forecast underspend is mainly due to forecast payroll underspends and the over- recovery of vacancy savings offset by agency staff costs. Premises 899 717 (182) (25.4%) 1,544 1,866 (322) (20.9%) The YTD overspend is mainly due to overspends on central repairs and property maintenance. The forecast overspend is due to anticipated overspends on utilities due to current market conditions as well as on central repairs and property maintenance. Some of the utility overspend is offset by an over-recovery on income for recharges to other bodies for shared costs. Supplies & Services 1,161 837 (324) (38.7%) 1,371 1,960 (589) (43.0%) The YTD and forecast overspends are mainly due to forecast slippage on agreed savings targets within C&F and homecare. Transport 348 371 23 6.2% 683 565 118 17.3% The YTD and forecast underspends are due to various travel underspends across the whole department following changes to working practices post Covid-19 and the number of staff vacancies. Third Party 30,496 30,675 179 0.6% 62,160 63,333 (1,173) (1.9%) The YTD underspend is largely due to budget profiling and the timing of payments to third parties across purchased care services. The forecast overspend is a result of demand for purchased care services across Adult Service and residential care with C&F. This is partially offset by underspends in Fostering and Adoption as well as underspends on unallocated centrally held funds. Page 56
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Income (20,386) (19,528) 858 (4.4%) (24,386) (26,280) 1,894 (7.8%) The YTD and forecast over recovery of income is mainly due to increased income from fees, charges and recharges. Totals 31,344 31,378 34 0.1% 76,117 76,117 0 0.0% YTD is year to date and represents the actual or budgeted expenditure and income for the financial year so far. Forecast Outturn is the estimate now of what expenditure or income will be for the whole of the financial year. The Variance is the difference between budget and actual or forecast outturn. A positive variance is when actual or forecast expenditure is less than budget or actual or forecast income is more than budget. A negative variance is shown in brackets and is when actual or forecast expenditure is more than budget or actual or forecast income is less than budget. An explanation is given for any variance which exceeds £50,000 or 10%. Page 57
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SOCIAL WORK – RED VARIANCES AS AT 31 OCTOBER 2023 Service Area Annual Budget £000 Forecast Outturn £000 Forecast Variance £000 % Variance Explanation Social Work Central Support (434) (894) 460 (106.0%) The forecast underspend is due to an over-recovery on vacancy savings (£278k) combined with underspends on centrally held funds, printing & stationery and postages. Management & Central Costs 1,467 1,120 347 23.7% The forecast underspend is mainly due to underspends on centrally held funds and staff vacancies. Older People 37,725 39,575 (1,850) (4.9%) The forecast overspend reflects demand driven overspends within the care home placement and homecare budgets. High staff costs across HSCP residential units due to agency cover are also contributing to the forecast overspend. These overspends are partially offset by staffing underspends across ACM teams and internal residential units. Learning Disability 14,217 13,617 600 4.2% The forecast underspend reflects known demand for Residential Placements partially offset by demand driven overspends on Supported Living and Respite. Mental Health 2,726 2,794 (68) (2.5%) The forecast overspend reflects higher than budgeted demand for services in Supported Living (£91k) and Residential Placements (£104k). These are partially offset by an underspend on addictions services and assessment and care management due to staff vacancies. Physical Disability 2,799 2,922 (123) (4.4%) The forecast overspend reflects higher than budgeted demand for Supported Living (£103k), Respite (£9k) and higher than budgeted equipment purchasing in the Integrated Equipment Store (£15k). These are offset slightly by a forecast underspends in the Residential Care and ACM Budgets. Child Protection 3,674 3,393 281 7.6% The forecast underspend is a result of demand for contact and welfare services as well as forecast underspends in the Area Teams on payroll costs, payments to other bodies, travel and subsistence. Criminal Justice 224 110 114 50.9% The forecast underspend is due to vacancies within the Criminal Justice team. Looked After Children 7,836 7,631 205 2.6% The forecast underspend is a result of demand for fostering, kinship and adoption placements as well as on supporting young people leaving care. There is also an over-recovery on income from the Home Office for unaccompanied asylum seeking children. This is all partially offset by demand for external residential placements and payroll overspends in the children's houses. A red variance is a forecast variance which is greater than +/- £50,000. Page 58
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MONITORING OF SAVINGS – AS AT 31 OCTOBER 2023 New policy savings were identified for the three year period 2023-24 to 2025-26 and these were agreed by Council in February 2023. Council agreed to policy savings of £6.145m in 2023-24 rising to £6.260m by 2025-26. The position of historical policy saving options is as follows: - 2022/23 – those not delivered or that have further increases in value in 2023-24 onwards total £0.187m - 2021/22 – those not delivered or that have further increase in value in 2023-24 onwards total £0.195m - 2020/21 – those not delivered total £0.050m - 2019/20 – all delivered - 2018/19 - those not delivered total £0.376m The 2023-24 savings have been removed from departmental budgets, however, it is important to monitor whether the saving has actually been delivered to ensure that costs are not continuing resulting in an overspend by the end of the year. It is also important to ensure that any preparatory work required to deliver savings in future years is on track. There are two savings where the department has indicated they will not be achieved, two are categorised as having a potential shortfall and one is currently delayed as summarised below: Saving Saving Agreed Status Detail Shortfall/ Delayed Value TB07 – Depots Feb-18 Will not be achieved Savings to date via the Oban project, tidying up NDR costs form previous disposals and removing security costs. The remainder of the outstanding saving is based on removing the smallest depot budget from each town but cannot do this without the capital investment to create fit for purpose single depot facilities. Working through possible alternative delivery model and updated business case for Lochgilphead – there is a shortfall between possible capital costs and likely income from vacated sites. This saving will not be achieved and a cost pressure has been put through for this for 2024-25. Work will be ongoing on the depot rationalisation across the area and future savings will be brought once known. £107,500 Page 59
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R&I17 - Public transport fare scale increase Feb-21 Will not be achieved Fare increase did not offset the saving advised by the Stantec review. This saving will not be achieved and shortfall has been absorbed by underspends elsewhere in the service. £29,000 TB13b Roads and Amenity Services charging (non-statutory services) Feb-18 Potential Shortfall - there is a risk that the original saving will not be achieved in full. The original proposal was to introduce charges for providing lighting design and increase charges by 20% for road construction consents, skips, scaffolds, hoarding, permits and licences. Whilst some additional income has been generated through third party works, opportunities are expected to be limited over the foreseeable future due to staff shortages and other competing demands. £150,000 TB12b Stadiums Feb-18 Potential Shortfall - there is a risk that the original saving will not be achieved in full. Discussions had stalled with partners in the Oban and Lorn area with regard to Mossfield stadium to create a sports Hub, attract external funding to improve facilities and therefore attract additional events to the arena. The users group has now reconvened and will be reporting to the steering group. It should be noted there is generally a downturn in usage of pitches partly due to more clubs booking all weather pitches at high schools and the loss of a well established club disbanding which will result in the loss of income. The Mossfield Sport Group have highlighted that certain clubs along with the Shinty Associations have expressed concerns with regards to the condition of the Pavilion and changing facilities and this is likely to impact on income. East King Street bookings have reduced due to the condition of the changing facilities and clubs having to play their fixtures elsewhere. £30,000 TB09 – Public Conveniences Feb-18 Delayed - The full saving will not be achieved in line with the original estimated timescale. Door access control project has an indicative start date of November for installs. This delay has missed the busy summer months and October holidays so expected income over winter will be minimal. We have no way to accurately predict income levels but the system allows for regular reporting and itemisation so we will quickly be in a position to profile future income. £24,000 All policy saving options previously agreed are noted in the table below for information. Page 60
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2023-24 2023-24 £000 FTE Executive Director Douglas Hendry CS01 Feb-22 Commercial Services Climate Change & Resource Efficiency 63.0 0.00 On Track to be Delivered CS03 Feb-22 Commercial Services Stretch Targets for One Council Income & Events 20.0 0.00 Delivered EDU2324-001 Feb-23 Education Estimated saving due to change in pupil numbers 700.00 0.0 Delivered EDU2324-002 Feb-23 Education Removal of non-statutory Cultural Coordinator post. 15.00 0.8 Delivered Executive Director Kirsty Flanagan DEG05(a) Feb-20 Development and Economic Growth Raise additional fees by adopting the current Building Cost Information Service (BCIS) guide for the cost of building work. Regular service users have been informed of this change. 50.00 0.0 Delivered DEG07 Feb-21 Development and Economic Growth Additional income through fees and charges for s64 Non-Material Amendment Submissions, non e-planning application submissions and property history searches 28.00 0.0 Delivered DEG01 Feb-22 Development and Economic Growth Crown Estate Administration Contribution to Project Delivery 104.0 0.00 Delivered DEG2324-002 Feb-23 Development and Economic Growth Reduce discretionary budget to minimum. Retain budget to pay memberships to SCDI, SLAED & HOPS but remove remainder of discretionary budget. 21.50 0.0 Delivered DEG2324-001 Feb-23 Development and Economic Growth Long-term vacant 0.5FTE building standards surveyors post that arose through an employee reducing their working hours is no longer requires in structure. 24.00 0.5 Delivered FIS2324-001 Feb-23 Financial Services Service Concessions - Alteration to accounting treatment to align the repayment of borrowing relating to new schools over their asset life. Guidance from Scottish Government now permits this change of accounting treatment. Further detail will be provided to Council in due course. 4,831.00 0.0 Delivered FIS2324-002 Feb-23 Financial Services The Service has identified savings through rightsizing of budgets, an organisational restructure with investment in modern apprenticeships and temporary staff designed to boost income from the billing of additional local taxes and the recovery of associated debt. In addition efficiency savings from increased productivity, increased levels of process automation and moving more customers to transact with the service over the internet will allow previously outsourced review works to be carried out internally. 493.00 0.0 On Track to be Delivered TB07 Feb-18 Roads and Infrastructure Services Create one main depot in key areas to reduce costs 172.50 0.0 Will not be achieved TB13b Feb-18 Roads and Infrastructure Services Roads & Amenity Services charging (non- statutory services) 150.0 0.00 Potential Shortfall TB12b Feb-18 Roads and Infrastructure Services Review charges for stadiums to enable improvement work 30.00 0.0 Potential Shortfall TB09 Feb-18 Roads and Infrastructure Services Public Conveniences - Progress sustainable models including turnstiles and franchising; establish simpler asset transfer process 24.00 0.0 Delayed R&I17 Feb-21 Roads and Infrastructure Services Public transport fare scale increase 76.00 0.0 Will not be achieved R&I05 Feb-21 Roads and Infrastructure Services Design service fees - bringing in line with industry standards and reduce cost of consultancy. Two posts created as a spend to save 50.00 -2.0 Delivered R&I09 Feb-21 Roads and Infrastructure Services Road inspections find and fix - reduce reactive work by proactivity. Moving to AI technology as technology develops 40.00 1.0 On Track to be Delivered R&I15 Feb-21 Roads and Infrastructure Services Emergency services support and fuel provision from our fuel supplies 0.50 0.0 Still to be Implemented RIS2324-001 Feb-23 Roads and Infrastructure Services Support Communities to move to different approaches to delivering School Crossing Patrols through engagement with Parent Council and Communities. 60.00 1.5 On Track to be Delivered TOTAL 6,952.5 1.8 Template Ref Saving Agreed Service Savings Option Status of Implementation Page 61
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ARGYLL AND BUTE COUNCIL FINANCIAL SERVICES POLICY AND RESOURCES COMMITTEE 7 DECEMBER 2023 FINANCIAL RISKS ANALYSIS 2023-24 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 risks, both revenue and capital, have been identified along with risks for each department and service of the Council. For each departmental risk the financial impact has been quantified and the likelihood assessed based on the standard risk matrix. 1.3 There are 6 Council wide revenue risks identified for 2023-24 currently amounting to £3.661m. 1.4 There are currently 39 departmental risks totalling £5.265m. Of the 39 departmental risks, 6 are categorised as likely. 1.5 The financial risks are monitored routinely and actions put in place to continue to mitigate the risks. Page 62
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ARGYLL AND BUTE COUNCIL FINANCIAL SERVICES POLICY AND RESOURCES COMMITTEE 7 DECEMBER 2023 FINANCIAL RISKS ANALYSIS 2023-24 2. INTRODUCTION 2.1 This report outlines the process and approach developed in carrying out a financial risks analysis and provides a note of the current assessment of financial risks for 2023-24. 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 restricted resources and cost and demand pressures there are a number of financial risks the Council needs to consider and manage. 3.1.2 There are a number of risks that affect the income or expenditure across the whole council and these have been identified. Financial risks have been considered by each department and service of the Council. 3.1.3 For each risk, the financial impact has been quantified and the likelihood assessed based on the standard risk matrix as follows: 1 – Remote 2 – Unlikely 3 – Possible 4 – Likely 5 – Almost Certain 3.1.4 The Argyll and Bute Integrated 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 IJB is responsible for financial and strategic oversight of these services. It is the responsibility of the IJB to consider the individual financial risks associated with Integration Services and they are therefore not contained within this report. A Council wide risk has been included in respect of the IJB being unable to deliver the social care service within the budget allocated. 3.2 Council Wide Risks Revenue 3.2.1 Utility costs remain a volatile area and it is difficult to accurately predict how the prices could vary. The outturn in respect of utilities for 2022-23 was an overspend of £0.597m which was due to the unprecedented inflationary uplifts within the Page 63
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energy market although forward purchasing sheltered the Council from the full impact. During 2023-24 the Council re-contracted for its energy needs and was exposed to significantly higher market rates creating an in year cost pressure of £0.936m with a proposal to fund this from the £1.4m contingency set aside for inflationary increases as part of the 2023-24 budget setting process. With the volatility of utilities pricing it is very difficult to predict the impact going forward but a financial risk based on a 20% variation based on the original utilities budget amounts to £0.827m. 3.2.2 The SJC pay award for 2023-24 has progressed but has still to be finalised and this may have an impact on the base budget if the pay award is greater than the total of what has been allowed for the in the budget. The Council has set aside budget equivalent to 3.5%, and the Scottish Government has agreed funding equivalent to 2.5%, which gives a total pay award budget equivalent to a 6% increase. This is a situation that will be kept under close review as the pay negotiations advance further. Each 1% costs an additional £0.826m (for SJC employees only). The financial risk is recognised at £0.826m at this stage. It should be noted that the Teachers pay award for 2023-24 is already settled and built into the budget. 3.2.3 At the budget meeting on 24 February 2023, the Council agreed 6 new policy savings options that would deliver savings over the period 2023-24 to 2025-26. The savings to be delivered in 2023-24 amount to £6.145m. Whilst the Council have a good track record in delivering savings, a 10% shortfall on this savings target would amount to £0.615m. 3.2.4 The estimated level of council tax income is based on current and forecast Band D equivalents and non-payment rates. This reflects our most recent experience in terms of the council tax base and likely collection rates. A 1% variation in council tax income amounts to approximately £0.593m. 3.2.5 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, the Council and NHS Highland. Where recovery plans are unsuccessful and an overspend occurs at the financial year end, and the HSCP has insufficient reserves to meet the overspend, then the partners will be required to make additional payments to the HSCP. Whilst any additional payments by the Council and NHS Highland will be deducted from future years funding, there is still a financial risk that the Council may have to pay out additional monies in year. As at 31 October 2023, the net HSCP outturn in 2023-24 is estimated to be a £0.850m overspend (Social Work forecasting a breakeven position and an overspend of £0.850m from Health). As Social Work are currently projecting a breakeven position and the IJB holds significant financial reserves, there is a nil value on the risk. 3.2.6 There is an ongoing requirement to fund unavoidable inflationary cost increases in areas like fuel, food etc. This has been predominantly caused by the lack of availability of supply of labour and materials as a result of the COVID-19 Page 64
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pandemic, the UK exit from the European Union, Russia’s invasion of Ukraine and sanctions on Russian owned entities and ongoing events in the Middle East. Inflation has begun to fall and the Bank of England estimates that it should continue to fall this year. We will continue to closely monitor the situation and update our financial forecasts using the best information available to us. A 1% general inflation increase has been included with a financial impact of £0.800m. 3.2.7 The Council wide risks are noted within the table below. Description Likelihood Assessed Financial Impact £000 Energy costs increase by 20% greater than anticipated 3 827 Pay award exceeding available funding 3 826 10% shortfall on Savings Options 2 615 1% variation in Council Tax Income 2 593 IJB refer to Council for additional funding to deliver social work services 1 0 1% variation of General Inflation Risk 4 800 Total 3,661 Capital 3.2.8 The finance settlement announcement on 20 December 2022 provided details of the Local Government funding for 2023-24 and there is therefore certainty as to what our funding is in respect of the General Capital Grant and the specific capital grants already distributed. 3.2.9 The capital plan for 2023-24 includes an estimate of £1.195m in respect of capital receipts. This is based on an assessment provided by the Special Projects Team in January 2023. A 10% variation equates to £0.120m and this would require to be managed across the capital programme. 3.2.10 3.2.11 3.2.12 General feedback from Scotland Excel and the Project Managers indicates that price increases and uncertainty continue to be experienced as well as disruptions to the supply chain and longer lead times, particularly in relation to the construction sector and material availability. This can be attributed to a number of factors such as the drag on markets and supplies of the COVID-19 pandemic, UK exit from the European Union, Russia’s invasion of Ukraine and sanctions on Russian owned entities and ongoing events in the Middle East, to name a few. The increased rate of inflation impacts costs such as energy prices, labour, packaging and transport. These all have an effect on the overall contract price and make it extremely challenging to manage expenditure and the availability of supply. While it has been possible to estimate the impact of these pressures on some projects, and therefore either include those projections within the capital Page 65
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monitoring report or adjust the capital programme accordingly, for others it is more difficult and no forecast has been projected at this stage but there are likely to be further significant financial impacts not yet reported. 3.2.13 Surveys have been completed in the Councils Learning Estates in relation to Reinforced Autoclaved Aerated Concrete (RAAC) with only 1 building confirmed as having it present with steps underway for its removal. This will include a decant of the students for approximately 9 months plus total removal and replacement of the roof during 2024. The estimated costs associated with this are £3m which will require additional funding. The Council is also currently undertaking both desktop and on-site assessments to establish if RAAC is elsewhere in the Estate in over 650 buildings with priority being given to categories of building where there is high and sustained footfall. No RAAC has been confirmed in these categories of building thus far. 3.3 Departmental/Service Risks 3.3.1 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 and likelihood category with the financial impact. 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 2 20 6 560 7 600 5 565 0 0 20 1,745 Executive Director Kirsty Flanagan 5 335 2 230 11 2,590 1 365 0 0 19 3,520 Total 7 355 8 790 18 3,190 6 930 0 0 39 5,265 3.3.2 The current top three risks in terms of the financial impact are noted in the table below. SERVICE TITLE OF RISK DESCRIPTION OF RISK LIKELIHOOD FINANCIAL IMPACT £000 Roads and Infrastructure Services Roads Maintenance - Bridges, Culverts & Sea Defences Extreme localised weather may result in loss of bridge, culvert, road or sea defence. 3 750 Page 66
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Roads and Infrastructure Services Waste PPP - Indexation Historical payments made towards Waste PPP based on indexation rates have been challenged by Renewi resulting in a potential cost to the council. 3 586 Roads and Infrastructure Services Winter Maintenance Adverse weather conditions which require greater than budgeted number of gritting runs. 4 365 3.3.3 The risks which are likely, but not included above, are noted below: SERVICE TITLE OF RISK DESCRIPTION OF RISK LIKELIHOOD FINANCIAL IMPACT £000 Council Wide - Commercial Services Council Wide Central Repairs Increased demands on central repair budgets (CRA) due to a decrease in Capital funding, increase in statutory and emergency repairs and increases in supplier/contractor charges. This impacts on all departments of the Council with a Central Repairs Budget. 4 300 Legal and Regulatory Support Contract RPI for NPDO and Hub Schools Increase in RPI would result in higher costs. 4 100 Legal and Regulatory Support NPDO - Reduction in insurance savings 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. 4 75 Legal and Regulatory Support Elections More than 1 by-election required outwith standard election cycle. 4 60 Legal and Regulatory Support Licensing Reduced numbers of licensing applications leading to reduced income. 4 30 Page 67
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3.4 Changes to Financial Risks since last report 3.4.1 There have been 4 changes to the departmental risks since the financial risks report was presented to the Policy and Resources Committee on 12 October 2023, as follows: - The risk in relation to Ferry Services – income has been removed as the risk has been realised and there is a forecast variance recognised within the budget monitoring report. - The risk in relation to Street Lighting has been removed as the risk has been realised and there is a forecast variance recognised within the budget monitoring report. - The risk in relation to Elections has been increased from ‘Possible’ to ‘Likely’ and value increased from £0.045m to £0.060m to reflect the increased risk of by-elections as there is now one by-election planned during 2023-24. - The risk in relation to NPDO – Reduction in insurance savings within NPDO schools has been increased from ‘Possible’ to ‘Likely’ given the increases in insurance costs. 3.5 Monitoring of Financial Risks 3.5.1 3.5.2 Financial risks will be reviewed and monitored on a two monthly basis and will be included in the pack of financial reports submitted to Policy and Resources Committee. During the 2023-24 budget setting process a contingency of £1.4m was agreed which was circa 0.5% of the Councils budget at that time. This was included due to the volatility in prices, the increases in inflation together with continuing increased demand. The risk associated with Winter Maintenance will be monitored closely over the coming months and should it materialise it is recommended that this contingency is used to offset the pressure. 3.6 Potential Future Risks 3.6.1 Scottish Government are, over the next 2 years, proposing to extend funded childcare to all 1 and 2 year olds across Scotland. This brings significant financial and qualitative risks to the service. The needs and legislative requirements for this age range would mean significant capital work across our estate and in many settings there is not the space so extensions would be required. Having this age range in the same play space as 3/4 year olds seriously impacts on the ability of practitioners to effectively support age appropriate learning and play. It is uncertain when this risk will arise. 3.6.2 The Councils bid to the Scottish Governments Learning Estate Investment Programme (LEIP) for funding for a new school campus on Mull was successful. While this is good news and will provide welcome investment in the school estate it does come with a financial pressure that is required to be funded if the project is to proceed. The Scottish Government will fund up to 50% of eligible costs leaving Page 68
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the Council to fund circa £20m therefore Council need to consider full affordability options before agreeing to progress with this project. There are £9m in earmarked reserves set aside for this purpose with funding required for the remaining balance. A paper outlining possible funding options will be presented to Council on 12 December 2023. 3.6.3 As a result of significant rainfall Argyll and Bute Council activated the Bellwin scheme in relation to the recovery of costs associated with the incident. The funding from this scheme is welcomed however eligibility criteria of costs are restrictive. Primarily the first £0.529m has to be covered by the Local Authority of which £0.398m has been identified from Crown Estates funding with the possibility this could be topped up further once the Crown Estate full year allocation of funding is confirmed. Secondly, capital expenditure does not qualify therefore any long term replacements to infrastructure such as bridges cannot be claimed through the scheme therefore if not already part of the capital programme will require funding. The costs associated with this are still being identified but there is a risk that a significant value of these work will have to be funded by the Council and not through the Bellwin scheme. A verbal update on the financial position will be provided at Policy and Resources Committee on 7 December. 3.6.4 In its present configuration, Argyll and Bute Council’s digital network does not have the capacity to accommodate the requirements of the Scottish Government’s vision for digital access over the next four years, including a device for every learner, which would entail a large increase in the number of devices accessing the network. The network requires to be redesigned to allow digital access on the scale proposed by the Scottish Government. In addition to investment in bandwidth, device management and protection, there is a requirement to replace existing network hardware in all schools. Following an independent consultation on the network by Insight, IT and Education have co- authored a paper “Resourcing Educations Digital Aspirations” that identifies the work required to meet the Scottish Governments expectations. COSLA have raised this issue with the Scottish Government and there is an expectation that this will be fully funded as it is a Scottish Government commitment but there remains a risk associated with this. 4 CONCLUSION 4.1 This report summarises the key financial risks facing the Council. There are 6 Council wide risks and 39 departmental risks identified with 6 categorised as likely. The financial risks are monitored routinely and actions put in place to continue to mitigate the risks. 5 IMPLICATIONS 5.1 Policy - None. 5.2 Financial - The financial value of each risk is included within the appendix. 5.3 Legal - None. 5.4 HR - None. 5.5 Fairer Scotland Duty - None. Page 69
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5.5.1 Equalities – protected characteristics - None. 5.5.2 Socio-economic Duty - None. 5.5.3 Islands - None. 5.6 Climate Change - None. 5.7 Risk - Financial risks are detailed within the appendix. 5.8 Customer Service - None. Kirsty Flanagan Executive Director/Section 95 Officer 3 November 2023 Policy Lead for Finance and Commercial Services - Councillor Gary Mulvaney 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 Page 70
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APPENDIX 1 DEPARTMENT/SERVICE FINANCIAL RISKS AS AT 31 OCTOBER 2023 DEPARTMENT SERVICE TITLE OF RISK DESCRIPTION OF RISK MITIGATING ACTIONS IN PLACE LIKELIHOOD FINANCIAL IMPACT £000 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 2 100 Executive Director Douglas Hendry Commercial Services Catering Purchases Increased supplier charges and higher than average inflation on food costs. In addition to this the Scottish Government reviewed the regulations that govern the food and drinks provided in schools and implemented revised regulations. The revised standards focus on reducing sugar, reducing red processed meat and increasing fibre. Thus far, there has been an increase in costs in produce and a reduction in demand for school meals. Joint strategy with procurement colleagues to reduce potential impact of supplier charges. Control food wastage/portion controls; introduction of online ordering to help manage food waste. Analysis and regular review of menu choices. 2 100 2 100 Executive Director Douglas Hendry Commercial Services Catering - Implementation of Universal Free School Meals in Primary Schools for P6 and P7 pupils The Scottish Government may not give the local authority adequate funds to support the policy to expand free school meals in primary schools to include P6 and P7 pupils (the scheme has already been implemented for P1 to P5 pupils). Although expansion paused for full implementation for P6&7, FSM expanded through entitlement to Scottish Child Payment. Senior Manager connected into the National Operational Delivery Group. This enables the Council's viewpoint to be considered. 2 100 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. 2 60 2 60 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 3 50 Executive Director Douglas Hendry Commercial Services Leisure Service Level Agreements Increase in RPI and/or other running costs (eg utilities, payroll etc) resulting in requests for additional funding. Monitoring annual alteration to contract RPI rate, communication with service providers and mitigation through financial forecasting and review of existing budget. 3 50 3 50 As at 31 August 2023 As at 31 October 2023 Page 71
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DEPARTMENT SERVICE TITLE OF RISK DESCRIPTION OF RISK MITIGATING ACTIONS IN PLACE LIKELIHOOD FINANCIAL IMPACT £000 LIKELIHOOD FINANCIAL IMPACT £000 Executive Director Douglas Hendry Council Wide - Commercial Services Council Wide Central Repairs Increased demands on central repair budgets (CRA) due to a decrease in Capital funding, increase in statutory and emergency repairs and increases in supplier/contractor charges. This impacts on all departments of the Council with a Central Repairs Budget. Joint strategy with procurement colleagues to reduce potential impact of supplier/contractor charges. Close monitoring of central repairs budgets and commitments and instructing only statutory tests/inspections and essential repairs. 4 300 4 300 Executive Director Douglas Hendry Education ASN Support Demand for ASN support continues to increase. Scottish Government statistics suggest a 3% year on year increase, resulting in an additional resource requirement. Particularly where gaps in our enhanced provision exist. 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 looking at 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. 3 200 3 200 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; Support network; Short-term cash injections. 3 100 3 100 Executive Director Douglas Hendry Education Legislative Requirements - 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 exceed the Government Grant in any given year. For example, if child numbers are higher than estimated, this may require additional staffing which has not been built included in the staffing model funded by Scottish Government. Continuous monitoring and review of the service model, usage and resources. 3 100 3 100 Executive Director Douglas Hendry Education Legislative Requirements - Education (Scotland) Act The Education (Scotland) Act 2000 requires Councils to undertake assessments of the need for the provision of Gaelic Medium Primary Education (GMPE) and the duty to support and promote Gaelic Education. This may lead to additional staffing requirements depending upon the demand for Gaelic from parents. Continuous monitoring and review of the service model and resources available within budget. 3 50 3 50 Executive Director Douglas Hendry Legal and Regulatory Support Hub DBDA/DBFM Schools - Litigation Increased risk of the requirement to litigate to conclude final capital contract payments due. Monitoring claims and mitigation through robust challenge of any additional claims. 2 150 2 150 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. 4 100 4 100 Page 72
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DEPARTMENT SERVICE TITLE OF RISK DESCRIPTION OF RISK MITIGATING ACTIONS IN PLACE LIKELIHOOD FINANCIAL IMPACT £000 LIKELIHOOD FINANCIAL IMPACT £000 Executive Director Douglas Hendry Legal and Regulatory Support NPDO - Reduction in insurance savings 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 4 75 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 50 3 50 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 2 50 Executive Director Douglas Hendry Legal and Regulatory Support Elections More than 1 by-election required outwith standard election cycle. Outwith direct management control. 3 45 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. 4 30 4 30 Executive Director Douglas Hendry Legal and Regulatory Support Children's Panel Increased number of referrals increasing costs through increases in the running costs. Maximise the use of council facilities/resources for panel session in the first instance. 1 10 1 10 Executive Director Douglas Hendry Legal and Regulatory Support Legal Services Failure to minimise Council wide use of external legal advice. Ensure legal services are gateway to access all legal advice. 1 10 1 10 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 2 100 Executive Director Kirsty Flanagan Customer Support Services Additional Bandwidth for Education Additional costs required to be incurred in relation to additional bandwidth required to deliver the Education Digital Strategy due to a more digitalised learning curriculum. Work closely with Education on Digital Devices for All strategy to ensure necessary IT is in place. 3 50 3 50 Executive Director Kirsty Flanagan Development and Economic Growth Environmental Health- export certificates Downturn in requests for export certificates as a result of UK withdrawal from EU, changes to international trading agreements or business economy. Reduction in demand creates a budget pressure on environmental health budget. Monitor income and resources required for export health certificates / attestations required to support the export market. Continue with food safety regulation activities associated and support at 3rd country audits. Pursue debt rigorously with key customers through seeking regular payments. 2 130 2 130 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 3 100 Executive Director Kirsty Flanagan Development and Economic Growth Planning fees reduced by Scottish Government Potential that the Scottish Government may reduce planning fees due to poor performance by the Planning Authority. The Scottish Government has recently appointed a national Planning Performance Champion however the detail of how this role intends to incentivise improvment/penalise poor performance at a local authority level remains unclear at this time Maintain high levels of performance as articulated by performance markers detailed in Planning Performance Framework annual report. 1 100 1 100 Page 73
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DEPARTMENT SERVICE TITLE OF RISK DESCRIPTION OF RISK MITIGATING ACTIONS IN PLACE LIKELIHOOD FINANCIAL IMPACT £000 LIKELIHOOD FINANCIAL IMPACT £000 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 50 1 50 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 1 50 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. 3 50 3 50 Executive Director Kirsty Flanagan Development and Economic Growth Animal Health Carrying out livestock seizure to protect welfare of the animals Monitor activity and seek to recover costs from the disposal of the animals. 1 10 1 10 Executive Director Kirsty Flanagan Financial Services Council Tax Debt Collection Recovery Recovery of debt becomes more difficult to pursue in the current economic climate. This is in relation to historical debt that has accumulated over many years therefore any adverse collection rates will impact on the year end debt provision as opposed to the in-year financial position, hence no forecast variance has been reported within the current year. Robust monitoring of arrangements with debt collection agency and performance against target collection rates. 3 345 3 345 Executive Director Kirsty Flanagan Financial Services Housing Benefit Subsidy Loss of Housing Benefit Subsidy due to exceeding LA error threshold. Processes in place for handling of claims accurately and efficiently. 1 125 1 125 Executive Director Kirsty Flanagan Financial Services Sundry Debt Recovery Recovery of debt becomes more difficult to pursue in the current economic climate. Additional staff are being put in place in the Sundry Debt Team who will work jointly with Legal Services to enhance the robustness of the Council's debt recovery processes. 3 85 3 85 Executive Director Kirsty Flanagan Financial Services Non-Domestic Rates Relief Risk of demand changing due to legislative changes outwith our control for charitable relief for Arms Length External Organisations (ALEO). Outwith direct management control. 3 30 3 30 Executive Director Kirsty Flanagan Roads and Infrastructure Services Waste PPP - Indexation Historical payments made towards Waste PPP based on indexation rates have been challenged by Renewi resulting in a potential cost to the council. Conversations are in place between Council and Renewi with the aim of minimising the potential impact. 3 586 3 586 Executive Director Kirsty Flanagan Roads and Infrastructure Services Waste - Compost Like Output (CLO) Compost Like Output is an element of waste that has been heat treated and can only be used for landfill site restoration. Renewi are currently producing more CLO than we need and it is building up in our landfill sites - this has been flagged up as a concern by SEPA and will need to be removed. Discussions ongoing with Renewi and the Council on steps forward and what element the council is responsible for. 3 164 3 164 Page 74
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DEPARTMENT SERVICE TITLE OF RISK DESCRIPTION OF RISK MITIGATING ACTIONS IN PLACE LIKELIHOOD FINANCIAL IMPACT £000 LIKELIHOOD FINANCIAL IMPACT £000 Executive Director Kirsty Flanagan Roads and Infrastructure Services Roads Maintenance - Bridges, Culverts & Sea Defences Extreme localised weather may result in loss of bridge, culvert, road or sea defence. Routine inspections to deal with potential weak areas - based on a stitch in time repair regime. 3 750 3 750 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. 4 365 4 365 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 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 3 200 41 5,550 39 5,265 Page 75
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ARGYLL AND BUTE COUNCIL POLICY & RESOURCES COMMITTEE FINANCIAL SERVICES 7 DECEMBER 2023 CAPITAL BUDGET MONITORING REPORT – 31 OCTOBER 2023 1.0 EXECUTIVE SUMMARY 1.1 This report provides an update on the position of the capital budget as at 31 October 2023. The report provides information on the financial position in respect of the capital plan and the performance in terms of delivery of capital plan projects. 1.2 Financial Position: Current Year to Date – actual net expenditure to date is £19,390k compared to a budget for the year to date of £19,360k resulting in an overspend for the year to date of £30k (0.15%). Forecast Outturn for 2023-24 – forecast net expenditure for the full financial year is £43,013k compared to an annual budget of £43,657k giving rise to a forecast underspend for the year of £644k (1.48%). Total Capital Plan – forecast total net project costs on the total capital plan are £216,052k compared to a total budget for all projects of £216,014k giving rise to a forecast overspend for the overall capital plan of £38k (0.02%). 1.3 Project Delivery: Asset Sustainability – Out of 84 projects there are 82 projects (98%) on track, 1 projects (1%) off track but recoverable and 1 project off track (1%). Service Development - Out of 42 projects there are 40 projects (95%) on track, 2 project (5%) off track but recoverable and 0 projects (0%) off track. Strategic Change – Out of 30 projects there are 29 projects (97%) on track, 0 projects (0%) are off track but recoverable and 1 project (3%) off track. 1.4 1.5 The Capital Programme is funded by various income streams as detailed in Appendix 5. Additional funding allocated since the last report has come from funding drawn down for Rural Growth Deal Clyde Engineering and Innovation Cluster and COVID reserves for ICT. A portion of earmarked Climate Change reserves which had been profiled as Capital Funding has been removed from the capital plan as it is being used within revenue. Capital receipts of £160k have been received so far in 2023-24. The estimated level of receipts will be kept under review as market conditions change, as will values following due diligence undertaken by prospective purchasers on the condition of asset. Page 76
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ARGYLL AND BUTE COUNCIL POLICY & RESOURCES COMMITTEE FINANCIAL SERVICES 7 DECEMBER 2023 CAPITAL BUDGET MONITORING REPORT – 31 OCTOBER 2023 2.0 INTRODUCTION 2.1 2.2 2.3 2.4 2.5 2.6 2.7 This report provides an update on the position of the capital budget as at 31 October 2023. The report provides information on the financial position in respect of the capital plan and the performance in terms of delivery of capital plan projects. Following the decision at Policy and Resources Committee on 9 December 2021, the Rothesay Pavilion project was put on pause whilst potential funding options were being considered. At the budget meeting in February 2023 additional funding was allocated to this project which will allow the project to progress towards success by supporting completion of certain work stages. The financial information included within this report now includes amounts relating to Phase 1 of the Rothesay Pavilion project. Campbeltown Flood Scheme has seen compensation events raised by the contractor which may result in an overspend within the project. These are currently being discussed with the consultant and cost saving approaches are being sought to bring the project in on budget therefore at this stage no forecast overspend has been included within the figures and the project is still marked as on track. The cost savings are hoped to mitigate these compensation events, though should sufficient savings fail to be identified, an overspend on the project is possible at which point it will be incorporated into the figures within this report. Surveys have been completed in the Councils Learning Estates in relation to RAAC with only 1 building confirmed as having it present with steps underway for its removal. This will include a decant of the students for approximately 9 months plus total removal and replacement of the roof during 2024. The estimated costs associated with this are £3m which will require additional funding and will be considered as part of the 2024-25 budget setting process. The Councils bid to the Scottish Governments Learning Estate Investment Programme (LEIP) for funding for a new school campus on Mull was successful. While this is good news and will provide welcome investment in the school estate it does come with a financial pressure that is required to be funded if the project is to proceed. The Scottish Government will fund up to 50% of eligible costs therefore the Council will be required to fund circa £19.755m. As a result of significant rainfall Argyll and Bute Council activated the Bellwin scheme in relation to the recovery costs associated with the incident. The funding from this scheme is welcomed however eligibility criteria of costs are restrictive. Capital expenditure does not qualify therefore any long term replacements to infrastructure such as bridges cannot be claimed through the scheme therefore if not already part of the capital programme will require funding. The costs associated with this are still being identified. New Waste legislation has been introduced on the disposal of Persistent Organic Pollutants (POPs). POPs are organic chemical substances which pose a risk to Page 77
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2.8 2.9 2.10 human health and the environment due to their persistence in the environment, bioaccumulation through the food chain and long-range environmental transport across a wide geographical range. These items of waste will need to be stored separately from general waste at landfill sites before being disposed of which will incur additional capital expenditure. Work is ongoing in relation to the impact and costs of this new legislation but early estimates suggest the capital costs will be in the region of £110k. A £1m cost pressure was identified during 2021-22 in relation to repairs to the A884 Ardbeg Sea Wall, where severe storm damage resulted in failure of the sea wall on Bute. Emergency works were carried out and a permanent solution is currently being developed. Additional funding of £1m was allocated for this purpose at the Council meeting on 24 February 2022 however there remains a risk that costs will exceed this. The impact of the pandemic along with the UK exit from the European Union, the Russian invasion of Ukraine and sanctions on Russian owned entities has seen significant price increases as well as disruptions to the supply chain and longer lead in times. The increased rate of inflation impacts costs such as energy prices, labour, packaging and transport. These all have an effect on the overall contract price and make it extremely challenging to manage expenditure and the availability of supply. As a result of this it should be noted that there are likely to be other significant financial impacts which are not quantifiable at this stage, as follows: Rothesay Pavilion – despite additional funding being awarded there remains a funding gap to allow full completion of the original intended works. Harbour Investment Programme – likely to be contractual cost increases in future years (expected to be funded from increased fees and charges). Universal Free School Meals – delayed roll out to P6 and P7 and uncertain capital funding levels available from the Scottish Government. Distributions of 2023-24 funding have not yet been announced. Other general construction inflationary increases. Although the direct impact of COVID on most local services has reduced or even ceased altogether over the last 12 months, COVID-19 in conjunction with the UK exit from the European Union and the Russian invasion of Ukraine, continues to affect worldwide supply chains. In recent years additional funding of £10.803m has been allocated to the capital programme for this purpose which has mitigated the impact to date however, as detailed in the table below, only £2.703m remains unallocated to projects facing inflationary pressures. Funding for Capital Inflationary Pressures £m COVID-19 Funding 0.257 February 2021 Budget Meeting - Capital Cost Pressures 4.646 February 2022 Budget Meeting - Capital Cost Pressures 3.900 February 2023 Budget Meeting – Capital Projects Inflation Pressures 2.000 Total Additional Funding Allocated to Capital 10.803 Allocated to Projects within Capital Programme (5.779) Committed for future years (2.321) Balance Remaining 2.703 Page 78
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4.0 CURRENT YEAR TO DATE FINANCIAL POSITION 4.1 4.2 Overall Position Actual net expenditure to date is £19,390k compared to a budget for the year to date of £19,360k resulting in an overspend for the year to date of £30k (0.15%). Project/Department Position The table below shows the year to date net expenditure against the year to date budget by project type and service: Project Type: Year to Date Budget £'000 Year to Date Actual £'000 Variance £'000 Asset Sustainability 8,255 8,261 (6) Service Development 1,910 1,934 (24) Strategic Change 9,195 9,195 0 Total 19,360 19,390 (30) Service: ICT 717 717 0 Education 3,036 3,036 0 Live Argyll 365 365 0 Health & Social Care Partnership 442 442 0 Shared Offices 396 398 (2) Roads & Infrastructure 11,099 11,127 (28) Development & Economic Growth 653 653 0 CHORD 2,652 2,652 0 Total 19,360 19,390 (30) Material variances are explained in Appendix 1 and there are a number of small variances contributing to the year to date overspend. 3.0 RECOMMENDATIONS 3.1 Note the contents of this report and the financial summaries as detailed in Appendix 8 and approve the proposed changes to the capital plan detailed in Appendix 4. Page 79
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5.0 FORECAST OUTTURN 2023-24 5.1 Overall Position Forecast net expenditure for the full financial year is £43,013k compared to an annual budget of £43,657k giving rise to a forecast underspend for the year of £644k (1.48%). 5.2 Project/Department Position The table below shows the forecast expenditure and budget for the year by project type and service. Project Type: Annual Budget £'000 Forecast Outturn £'000 Forecast Variance £'000 Asset Sustainability 25,404 25,230 174 Service Development 160 194 (34) Strategic Change 18,093 17,589 504 Total 43,657 43,013 644 Service: ICT 1,428 1,428 0 Education 6,911 6,911 0 Live Argyll 1,263 1,083 180 Health & Social Care Partnership 2,201 2,201 0 Shared Offices 1,904 1,906 (2) Roads & Infrastructure 24,683 24,725 (42) Development & Economic Growth (423) (931) 508 CHORD 5,690 5,690 0 Total 43,657 43,013 644 Material variances are explained in Appendix 2 and there are a number of smaller variances contributing to the forecast underspend. Page 80
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6.0 TOTAL PROJECT COSTS 6.1 Overall Position Forecast total net project costs on the total capital plan are £216,052k compared to a total budget for all projects of £216,014k giving rise to a forecast overspend for the overall capital plan of £38k (0.02%). 6.2 Project/Department Position The table below shows the forecast expenditure and budget for the total capital plan by project type and service. Project Type: Capital Plan Budget £'000 Forecast Project Costs £'000 Total Capital Plan Variance £'000 Asset Sustainability 59,383 59,387 (4) Service Development 22,317 22,351 (34) Strategic Change 134,314 134,314 0 Total 216,014 216,052 (38) Service: ICT 6,380 6,380 0 Education 45,630 45,630 0 Live Argyll 2,970 2,970 0 Health & Social Care Partnership 4,752 4,752 0 Shared Offices 23,539 23,539 0 Roads & Infrastructure 59,247 59,275 (28) Development & Economic Growth 5,297 5,307 (10) CHORD 68,199 68,199 0 Total 216,014 216,052 (38) Material variances are explained in Appendix 3 and there are a number of smaller variances leading to the forecast overspend. Page 81
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7.0 TOTAL PROJECT PERFORMANCE 7.1 Overall Position There are 156 projects within the Capital Plan, 151 are Complete or On Target, 3 are Off Target and Recoverable and 2 are Off Track. 7.2 Project Position The table below shows the Performance Status of the Projects in the Capital Plan. Project Type: Complete/ On Target Off Target/ Recoverable Off Target/ Problem Total Asset Sustainability 82 1 1 84 Service Development 40 2 0 42 Strategic Change 29 0 1 30 Total 151 3 2 156 Service: ICT 7 0 0 7 Education 31 0 0 31 Live Argyll 18 0 1 19 Health & Social Care Partnership 17 0 0 17 Shared Offices 24 0 0 24 Roads & Infrastructure 33 2 0 35 Development & Economic Growth 15 1 1 17 CHORD 6 0 0 6 Total 151 3 2 156 Page 82
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7.3 Chart of Performance Status The graph provides a view of the Performance Status of the Projects included in the Capital Plan: Page 83
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8.0 OFF TRACK PROJECTS 8.1 9.0 9.1 The Off-Track projects are noted in the table below and variance reports are included in Appendix 6. Project Type Project What is Off Track? Explanation Asset Sustainability Lochgilphead Community Education Centre Current year spend Slippage from 2023-24 into 2024-25. Delays occurred due to lack of available external Mechanical and Electrical Consultants. See variance report for details. Strategic Change 03 TIF - Halfway House Roundabout Current year spend Slippage from 2023-24 into 2024-25. Long term scope of the project is still being discussed with input from Scottish Government expected by end of 2023- 24. See variance report for details. STRATEGIC CHANGE PROJECTS Appendix 7 gives detailed information in respect of the Strategic Change Projects within the Capital Plan. The appendix gives details of the forecast cost of each project against the approved budget, the start and anticipated completion date of the project and an assessment of the risks of the project and, if these are not green, gives an explanation of the problem. Page 84
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10.0 10.1 CHANGES TO CAPITAL PLAN The table below shows proposed changes to the Capital Plan at summary level which include slippages, accelerations and virements. Explanations relating to the specific projects involved can be seen in Appendix 4. The updated gross expenditure capital plan incorporating these proposed changes can be found in Appendix 9. Department Prev. Agreed Changes 2023-24 2023- 24 2024- 25 2025- 26 Future Years Total Capital Plan £’000 £’000 £’000 £’000 £’000 £’000 Asset Sustainability (977) (178) 178 0 0 0 Service Development (12) 0 0 0 0 0 Strategic Change (6,933) (504) 509 (5) 0 0 Total (7,922) (682) 687 (5) 0 0 Service: ICT 154 0 0 0 0 0 Education (903) 0 0 0 0 0 Live Argyll (28) (180) 180 0 0 0 Health & Social Care Partnership 0 0 0 0 0 0 Shared Offices (366) 2 (2) 0 0 0 Roads & Infrastructure (6,237) 14 (9) (5) 0 0 Development & Economic Growth (20) (518) 518 0 0 0 Major Projects (522) 0 0 0 0 0 Total (7,922) (682) 687 (5) 0 0 11.0 FUNDING 11.1 The Capital Programme is funded by various income streams as detailed in Appendix 5. Additional funding allocated since the last report has come from funding drawn down for Rural Growth Deal Clyde Engineering and Innovation Cluster and COVID reserves for ICT. A portion of earmarked Climate Change reserves which had been profiled as Capital Funding has been removed from the capital plan as it is being used within revenue. Page 85
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12.0 12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 IMPLICATIONS Policy – Monitors progress against the capital plan. Financial – Monitors funding and commitments of the capital plan. Legal – Available funding may not address all Statutory and Regulatory requirements in relation to Health and Safety. HR – Available funding may have an impact on the sustainability of the Property Design Team and Infrastructure Design Team. Fairer Scotland Duty – None. 12.5.1 Equalities – protected characteristics – None. 12.5.2 Socio-economic Duty – None. 12.5.3 Islands – None. Climate Change – The Council is committed to addressing climate change via projects within the capital plan. Risk – There are risks around increasing capital contract costs and the level and timing of capital receipts. Customer Service – None. Kirsty Flanagan Executive Director / Section 95 Officer 07 November 2023 Policy Lead for Finance and Commercial Services – Councillor Gary Mulvaney APPENDICES - Appendix 1 – Year To Date finance variance explanations - Appendix 2 – Forecast Outturn variance explanations - Appendix 3 – Total Project finance variance explanations - Appendix 4 – Changes to Capital Plan and Financial Impact - Appendix 5 – Capital Funding - Appendix 6 - Off Track project variance reports - Appendix 7 - Cumulative spend, completion dates and risks relating to significant capital projects. - Appendix 8 - Financial Summary – Overall - Financial Summary – Executive Director Kirsty Flanagan - Financial Summary – Executive Director Douglas Hendry - Appendix 9 - Updated/Revised Capital Plan For further information contact: Anne Blue, Head of Financial Services anne.blue@argyll-bute.gov.uk Page 86
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APPENDIX 1 – Year to Date Financial Variance Explanations Listed below are the projects where the variance is +/- £50k. Project YTD Budget £’000 YTD Actual £’000 (Over)/ Under Variance £’000 Explanation Other variances under £50k (30) Total value of non-material variances less than +/-£50k Total 19,390 19,360 (30) Page 87
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APPENDIX 2 – Outturn Variance Explanations Listed below are the projects where the current year variance is +/- £50k. Project Annual Budget £’000 Outturn £’000 (Over)/ Under Forecast Variance COVID-19 Related £’000 (Over)/ Under Forecast Variance Non COVID-19 Related £’000 Total (Over)/ Under Forecast Variance £’000 Explanation TIF - Halfway House Roundabout 574 56 0 518 518 Slippage from 2023-24 into 2024-25. Project delayed in planning stage due to scope of project changing. See variance report for details. Lochgilphead Community Education Centre 302 122 0 180 180 Slippage from 2023-24 into 2024-25. Delays occurred due to lack of available external Mechanical and Electrical Consultants. See variance report for details. Other variances under £50k 0 (54) (54) Total value of non-material variances less than +/- £50k. Total 0 644 644 Page 88
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APPENDIX 3 – Total Project Finance Variances Listed below are the projects where the total project variance is +/- £50k. Project Capital Plan Budget £’000 Forecast Project Costs £’000 (Over)/ Under Forecast Variance COVID-19 Related £’000 (Over)/ Under Forecast Variance Non COVID-19 Related £’000 Total (Over)/ Under Forecast Variance £’000 Explanation Other variances under £50k (38) (38) Total value of non-material variances less than +/- £50k. Project Managers are working to reduce these small individual overspends by identifying underspends elsewhere within the capital plan. Total (38) (38) Page 89
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APPENDIX 4 – Changes to Capital Plan and Financial Impact OVERALL COST CHANGES Project 2023- 24 £’000 2024- 25 £’000 2025- 26 £’000 Future Years £’000 Total Capital Plan £’000 Recommendation Explanation Total Cost Changes 0 0 0 0 0 SLIPPAGES AND ACCELERATIONS Project 2023- 24 £’000 2024- 25 £’000 2025-26 £’000 Future Years £’000 2023-24 Slippage Related to COVID-19 £’000 2023-24 Slippage Related to Non COVID- 19 £’000 Total 2023-24 £’000 Recommendation Explanation 03 TIF - Halfway House Roundabout (518) 518 (518) (518) Slip budget from 2023-24 into 2024- 25. Slippage from 2023-24 into 2024- 25. See variance report for details. Campbeltown Flood Scheme 14 (9) (5) 14 14 Accelerate budget from 2024-25 and 2025-26 into 2023- 24. Minor change (0.09% of total project budget) to Campbeltown Flood Scheme expenditure profile from Consultant update. Lochgilphead Community Education Centre (180) 180 (180) (180) Slip budget from 2023-24 into 2024- 25. Slippage from 2023-24 into 2024- 25. Some works rescheduled to ensure they don’t impact the facility during it’s busier months. This has led to minor slippage out with 2023- 24. Burnett Building 2 (2) 2 2 Accelerate budget from 2024-25 into 2023-24 Accelerate from 2024-25 into 2023- 24. Building condition survey carried out. Total Slippages and Accelerations (682) 687 (5) 0 0 (682) (682) Net Impact of Changes (682) 687 (5) 0 0 (682) (682) Page 90
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CAPITAL PROGRAMME FUNDING Appendix 5 Estimated Capital Funding Carry Forwards from 22-23 Slippage / Acceleration Additional Funding Updated Capital Funding Available Estimated Capital Funding Carry Forwards from 22-23 Slippage / Acceleration Additional Funding Updated Capital Funding Available Estimated Capital Funding Carry Forwards from 22-23 Slippage / Acceleration Additional Funding Updated Capital Funding Available General Capital Grant 11,900 222 -222 0 11,900 9,851 -276 0 129 9,704 10,007 54 0 0 10,061 Transfer to Revenue for Private Sector Housing Grant (PSHG) -1,033 0 0 0 -1,033 -1,033 0 0 0 -1,033 -1,033 0 0 0 -1,033 Capital Receipts 1,195 0 0 0 1,195 350 0 0 0 350 400 0 0 0 400 Flooding Allocation 155 0 0 0 155 155 0 0 0 155 155 0 0 0 155 Ring Fenced Capital Grant 5,800 0 14 0 5,814 304 0 314 400 1,018 0 0 -324 0 -324 Restricted Funding 1,613 0 -522 1,389 2,480 0 0 488 2,065 2,553 0 0 34 50 84 Funded by Reserves 11,909 8,871 0 243 21,023 9,518 289 0 186 9,993 1,175 -155 0 0 1,020 Additional Funding from Revenue 25 0 0 117 142 0 0 0 0 0 0 0 0 0 0 Insurance 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Harbour Investment Programme 22,235 -13,035 0 0 9,200 27,025 -5,025 0 0 22,000 29,700 20,300 0 0 50,000 Prudential Borrowing 20,718 -6,345 -8,078 74 6,369 27 6,434 8,300 0 14,761 0 1,388 0 0 1,388 Loans Fund Review 0 131 0 0 131 0 0 0 0 0 0 0 0 0 0 COVID Funding 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 74,517 -10,156 -8,808 1,823 57,376 46,197 1,422 9,102 2,780 59,501 40,404 21,587 -290 50 61,751 BREAKDOWN OF ADDITIONAL FUNDING Additional Funding 2023-24 2024-25 2025-26 Source Reported Tobermory Top Flat - SHF 30 Revenue Funding Jan-23 Dunoon STEM Hub 50 Revenue Funding Jan-23 Dunoon STEM Hub 150 Grant Funding Jan-23 Dunoon Cycle Bothy 145 Grant Funding Jan-23 Gartbreck - Capping 118 Reserves Mar-23 Dunoon Cycle Bothy 74 Scottish Government Mar-23 Tigh Na Rhuda 400 50 Scottish Government Mar-23 Helensburgh and Rosneath Cycleways 290 SPT Jun-23 SPT - Bus Infrastructure 25 SPT Jun-23 Dunoon STEM Hub 1,750 Rural Growth Deal Jun-23 Rural Growth Deal planning stages 132 Rural Growth Deal Jun-23 Public Conveniences Upgrade - Coastal Communities Fund 200 Coasal Communities Fund Jul-23 Tobermory Harbour Wall and Railings, Phase 2 100 Coasal Communities Fund Jul-23 Tobermory Harbour Wall and Railings, Phase 2 250 Scottish Government Jul-23 Server Sustainability 95 Earmarked Reserves Jul-23 Oban Depot Development 67 Revenue Funding Aug-23 Roads Recon - STTS Funding 347 STTS Aug-23 Roads Recon - STTS Funding 40 STTS Sep-23 Coastal Change Adaptation 129 Scottish Government Sep-23 Telecomms Network 236 Earmarked Reserves Oct-23 Clean Energy - NDEEF1 -50 Earmarked Reserves Oct-23 Rural Growth Deal - Clyde Engineering 25 Earmarked Reserves Oct-23 Total 1,823 2,780 50 2025-262024-252023-24 Page 91
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OFF TRACK PROJECT Appendix 6 Project Name: Lochgilphead CeC Project Manager: Rhona Mitchell Risk: Initial Start Date: February 2024 Proposed End Date: July 2024 How was this project initially funded? Capital Please detail any additional funding. Previously Reported Committee and Date: Next Reported Committee and Date: Why is the project classified as off target? Continued issues with availability of skilled external Mechanical & Electrical Consultants have resulted in delays to the design aspect of the programme, specialist design of the solar roof panels, the associated structural considerations and confirmation of current loading capacity have compounded delays of a final designed outcome and works have been unable to commence as planned. In order to mitigate any potential prolongation costs projects have been reprogrammed to reduce the commercial impact on the programme as a whole, revised timelines have been agreed with the Client representative and at all times minimise disruption to Live Argyll’s day to day business. What has caused the issue outlined above? Issues with appointment and availability of skilled external Mechanical & Electrical Consultants have resulted in delays to the design aspect of the programme, more specifically the specialist design of the solar roof panels and the associated structural considerations which have impacted on the detailing of the final roof detail and Nett Zero requirements. Revised timelines have been agreed with the Client and are now programmed for commencement in February 2024 and are due for completion by end of July 2024. What action will be taken to rectify this issue? All efforts are being made to maximise 23/24 spend, accelerate the works and mitigate any further delays, however, continued issues with availability of suitably skilled labour, transport and material deliveries will impact our current spend profile and as a consequence the spend has been re-profiled into 24/25. What are the implications of the action proposed? Successful completion programmed for Summer 24. Realistic Capital reporting. Page 92
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OFF TRACK PROJECT Appendix 6 Project Name: Halfway House Roundabout Project Manager: Adrian Jackson-Stark Risk: Low Initial Start Date: Proposed End Date: How was this project initially funded? Please detail any additional funding. Previously Reported Committee and Date: Next Reported Committee and Date: Why is the project classified as off target? The project has been classified as off target due to £518k of forecasted expenditure slipping from 2023-24 into 2024-25. What has caused the issue outlined above? Plans are still being developed and there is as yet no final decision on what this project could look like in the long term – it could be much larger than it currently is – a view from Scottish Government is expected at least in principle late in 2023 or early 2024. For the current scope there is no spend imminently – this project requires planning permission to be obtained by a third party prior to instigation and this is likely to occur with the award of a design contract in the spring of 2024. What action will be taken to rectify this issue? Updates will be provided early 2024 once scope of project has been determined. What are the implications of the action proposed? Slippage from 2023-24 into 2024-25 at the earliest with potential for further slippage. Page 93
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Strategic Change Projects - Cumulative Spend, Start/Finish Dates and Project Risks APPENDIX 7 Strategic Change Projects Prior Years Spend £'000 Current Year Forecast £'000 Total Project Forecast £'000 Total Project Budget £'000 Project Start Date Estimated Completion Date Project Risks Identified Explanation Helensburgh Waterfront Development 23,415 977 24,392 24,392 01/04/2017 31/03/2024 Green Physically complete, retentions outstanding Campbeltown Flood Scheme 4,992 9,874 15,215 15,215 01/08/2016 31/03/2024 Green Contractor's updated programming of work moved Public Utility works from 22/23 to 23/24 CHORD Oban 7,279 626 7,905 7,905 27/10/2016 31/03/2022 Green Issues with contract close out impacting on timescales. TIF - Halfway House Roundabout 66 56 640 640 tbc tbc Red Scope of project still to be determined - budget to be reprofiled. CHORD Rothesay 15,231 6,737 24,012 24,012 tbc tbc Green Project recommenced. Harbour Investment Programme 7,397 3,243 91,335 91,335 01/04/2017 31/03/2028 Green Budget slipped into future years. Dunoon Primary 10,635 234 10,869 10,869 18/12/2014 30/04/2020 Green Physically complete - negotiations with contractor delaying payment of final sums outstanding. Kirn Primary School 10,085 34 10,119 10,119 24/04/2014 31/10/2017 Green Physically complete - negotiations with contractor delaying payment of final sums outstanding. Replacement of Oban High 2,844 406 3,250 3,250 24/04/2014 31/01/2019 Green Physically complete - negotiations with contractor delaying payment of final sums outstanding. Street Lighting LED Replacement 3,226 674 3,900 3,900 01/08/2016 31/12/2024 Green Tender for final package of works still to be awarded. Helensburgh Office Rationalisation 11,538 300 11,838 11,838 25/04/2013 31/12/2022 Green Project subject to legal dispute. CHORD Dunoon 12,495 27 12,522 12,522 03/02/2012 09/03/2018 Green Main contract complete and retentions paid. Landscaping and remediation works ongoing but issues with water ingress may require works in 22-23. Kilmory Business Park Phase 2AA 47 560 1,129 1,129 01/02/2022 01/09/2024 Green Development Agreement still to be concluded. Carbon Management - Non Education 29 21 50 50 01/04/2015 31/12/2024 Green Projects being determined. Dunoon Pier OBC 2,844 0 2,844 2,844 03/02/2012 26/02/2016 Green Project complete. Campbeltown Office Rationalisation 595 1 596 596 01/02/2015 31/03/2019 Green Complete. TIF - Oban Airport Business Park 489 56 590 590 22/01/2015 31/12/2025 Green Campbeltown Schools Redevelopment 2,092 38 2,130 2,130 16/02/2012 30/11/2018 Green Physically complete - negotiations with contractor delaying payment of financial sums outstanding. CHORD - Helensburgh 6,529 28 6,557 6,557 29/09/2011 30/04/2015 Green Main contract complete. Art project proposed for 23-24. TIF - North Pier Extension 214 0 214 214 06/12/2017 06/12/2021 Green Complete. TIF - Lorn/Kirk Road 2,169 1 2,170 2,170 22/01/2015 31/03/2021 Green Complete. Carbon Management Fuel Conversions 107 0 107 107 01/02/2014 31/03/2019 Green Complete. Kilmory Biomass Carbon Management 956 0 956 956 20/09/2012 31/03/2019 Green Complete. Clean Energy - NDEEF1 964 224 1,331 1,331 tbc 31/03/2024 Green Clean Energy - NDEEF2 0 50 1,140 1,140 tbc tbc Green Net Zero 0 0 366 366 tbc tbc Green Strategic Change Total 129,739 24,167 239,678 239,678 Project Risk Classifications: Green - Risks can be managed and are viewed as stable or reducing. Amber - Risks are increasing but are still manageable. Red - Risks are increasing or have increased to such an extent they may affect delivery of the project. Capital Expenditure Dates Risks Page 94
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ARGYLL AND BUTE COUNCIL - CAPITAL PLAN MONITORING REPORT - OVERALL COUNCIL Appendix 8 FINANCIAL SUMMARY - NET EXPENDITURE Current Financial Year To Date Budget Actual (Over)/Under Variance Budget Forecast (Over)/Under Variance Budget Forecast (Over)/Under Variance £000s £000s £000s £000s £000s £000s £000s £000s £000s EXPENDITURE Asset Sustainability Projects Executive Director Douglas Hendry 3,917 3,919 (2) 10,574 10,396 178 23,036 23,036 0 Executive Director Kirsty Flanagan 4,768 4,772 (4) 16,055 16,059 (4) 38,022 38,026 (4) Asset Sustainability Total 8,685 8,691 (6) 26,629 26,455 174 61,058 61,062 (4) Service Development Projects Executive Director Douglas Hendry 320 320 0 525 525 0 16,437 16,437 0 Executive Director Kirsty Flanagan 1,645 1,669 (24) 6,199 6,233 (34) 38,309 38,343 (34) Service Development Total 1,965 1,989 (24) 6,724 6,758 (34) 54,746 54,780 (34) Strategic Change Projects Campbeltown Schools Redevelopment 0 0 0 38 38 0 2,130 2,130 0 Dunoon Primary 2 2 0 234 234 0 10,869 10,869 0 Replacement of Oban High 0 0 0 406 406 0 3,250 3,250 0 Kirn Primary School 0 0 0 34 34 0 10,119 10,119 0 Carbon Management - Non Education 0 0 0 21 21 0 50 50 0 Carbon Management Business Cases 0 0 0 0 0 0 201 201 0 NPDO Schools Solar PV Panel Installations 0 0 0 0 0 0 761 761 0 Non NPDO Schools Solar PV Panel Installations 0 0 0 0 0 0 400 400 0 Carbon Management Fuel Conversions 0 0 0 0 0 0 107 107 0 Carbon Management Capital Property Works 2016/17 0 0 0 0 0 0 19 19 0 Carbon Management - Group Heating Conversion Project 0 0 0 0 0 0 1,938 1,938 0 Kilmory Biomass Carbon Management 0 0 0 0 0 0 956 956 0 Oil to Gas Heating Conversions 0 0 0 0 0 0 182 182 0 Campbeltown Office Rationalisation 0 0 0 1 1 0 596 596 0 Helensburgh Office Rationalisation 0 0 0 300 300 0 11,838 11,838 0 Clean Energy - NDEEF1 0 0 0 224 224 0 1,331 1,331 0 Clean Energy - NDEEF2 0 0 0 50 50 0 1,140 1,140 0 Net Zero 0 0 0 0 0 0 366 366 0 Campbeltown Flood Scheme 6,516 6,516 0 9,860 9,874 (14) 15,215 15,215 0 Street Lighting LED Replacement 24 24 0 674 674 0 3,900 3,900 0 Harbour Investment Programme 522 522 0 3,200 3,200 0 91,292 91,292 0 Harbour Investment Programme Non - PB 0 0 0 43 43 0 43 43 0 TIF - Lorn/Kirk Road 0 0 0 1 1 0 2,170 2,170 0 TIF - North Pier Extension 0 0 0 0 0 0 214 214 0 TIF - Oban Airport Business Park 1 1 0 56 56 0 590 590 0 TIF - Halfway House Roundabout 0 0 0 574 56 518 640 640 0 CHORD - Helensburgh 0 0 0 28 28 0 6,557 6,557 0 CHORD Dunoon 0 0 0 27 27 0 12,522 12,522 0 CHORD Oban 0 0 0 626 626 0 7,905 7,905 0 CHORD Rothesay 2,600 2,600 0 6,737 6,737 0 24,012 24,012 0 Helensburgh Waterfront Development 52 52 0 977 977 0 24,392 24,392 0 HWD - FFE (Funded by LA) 0 0 0 34 34 0 350 350 0 Kilmory Business Park Phase 2AA 0 0 0 560 560 0 1,129 1,129 0 Dunoon Pier OBC 0 0 0 0 0 0 2,844 2,844 0 Strategic Change Total 9,717 9,717 0 24,705 24,201 504 240,028 240,028 0 Total Expenditure 20,367 20,397 (30) 58,058 57,414 644 355,832 355,870 (38) INCOME Asset Sustainability Executive Director Douglas Hendry 0 0 0 (128) (128) 0 (578) (578) 0 Executive Director Kirsty Flanagan (430) (430) 0 (1,097) (1,097) 0 (1,097) (1,097) 0 Asset Sustainability Total (430) (430) 0 (1,225) (1,225) 0 (1,675) (1,675) 0 Service Development Projects Executive Director Douglas Hendry 0 0 0 0 0 0 (7,771) (7,771) 0 Executive Director Kirsty Flanagan (55) (55) 0 (6,564) (6,564) 0 (24,658) (24,658) 0 Service Development Total (55) (55) 0 (6,564) (6,564) 0 (32,429) (32,429) 0 Strategic Change Projects Helensburgh Office Rationalisation 0 0 0 0 0 0 (349) (349) 0 Dunoon Primary 0 0 0 0 0 0 (137) (137) 0 Campbeltown Flood 0 0 0 0 0 0 (270) (270) 0 Harbour PB (522) (522) 0 (3,200) (3,200) 0 (91,292) (91,292) 0 01 TIF - Lorn/Kirk Road 0 0 0 (113) (113) 0 (2,154) (2,154) 0 H'burgh CHORD Public Realm Imprv 0 0 0 0 0 0 (570) (570) 0 Helensburgh Waterfront Development 0 0 0 (2,320) (2,320) 0 (7,979) (7,979) 0 Kilmory Business Park Phase 2AA 0 0 0 (979) (979) 0 (979) (979) 0 CHORD - Dunoon Waterfront 0 0 0 0 0 0 (10) (10) 0 CHORD - Oban 0 0 0 0 0 0 (1,624) (1,624) 0 Strategic Change Total (522) (522) 0 (6,612) (6,612) 0 (105,714) (105,714) 0 Total Income (1,007) (1,007) 0 (14,401) (14,401) 0 (139,818) (139,818) 0 Net Total 19,360 19,390 (30) 43,657 43,013 644 216,014 216,052 (38) Full Year This Financial Year Total Project Costs 31 October 2023 Page 95
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MONITORING REPORT Budget Actual Variance Budget Forecast Variance Budget Forecast Variance £000s £000s £000s £000s £000s £000s £000s £000s £000s EXPENDITURE Asset Sustainability Education 2,714 2,714 0 5,853 5,853 0 13,403 13,403 0 Live Argyll 365 365 0 1,242 1,062 180 2,125 2,125 0 Health and Social Care Partnership 442 442 0 2,147 2,147 0 3,452 3,452 0 Shared Offices 396 398 (2) 1,332 1,334 (2) 4,056 4,056 0 Asset Sustainability Total 3,917 3,919 (2) 10,574 10,396 178 23,036 23,036 0 Service Development Projects Ardrishaig Primary Pre 5 Unit 0 0 0 0 0 0 2 2 0 Bowmore Primary School - Pre 5 Unit 0 0 0 0 0 0 149 149 0 Clyde Cottage - 600 hour provision 0 0 0 0 0 0 556 556 0 Craignish Primary School - Pre 5 Extension 0 0 0 0 0 0 400 400 0 Iona Primary School - Pre 5 Unit 0 0 0 0 0 0 490 490 0 Islay High and Rosneath Primary School Pitches 0 0 0 0 0 0 719 719 0 Lochgoilhead Primary School - Pre 5 Unit 0 0 0 0 0 0 391 391 0 Park Primary Extension/Pre Fives Unit 0 0 0 0 0 0 341 341 0 Sandbank Gaelic Pre Five Unit 0 0 0 0 0 0 491 491 0 Bunessan Primary School - Gaelic Medium Improvements 0 0 0 0 0 0 120 120 0 Early Learning and Childcare 0 0 0 0 0 0 850 850 0 Early Learning and Childcare - 1140 Hours 320 320 0 320 320 0 7,774 7,774 0 CO2 Monitoring - Covid Mitigation in Schools 0 0 0 113 113 0 192 192 0 Early Learning and Childcare - 1140 Hours - CFCR 0 0 0 0 0 0 1,379 1,379 0 Riverside Leisure Centre Refurbishment 0 0 0 0 0 0 1,245 1,245 0 Dunclutha Childrens Home 0 0 0 54 54 0 1,300 1,300 0 Service Development Total 320 320 0 525 525 0 16,437 16,437 0 Strategic Change Projects Campbeltown Schools Redevelopment 0 0 0 38 38 0 2,130 2,130 0 Dunoon Primary 2 2 0 234 234 0 10,869 10,869 0 NPDO Schools Solar PV Panel Installations 0 0 0 0 0 0 761 761 0 Non NPDO Schools Solar PV Panel Installations 0 0 0 0 0 0 400 400 0 Carbon Management Fuel Conversions 0 0 0 0 0 0 107 107 0 Carbon Management Capital Property Works 2016/17 0 0 0 0 0 0 19 19 0 Carbon Management - Group Heating Conversion Project 0 0 0 0 0 0 1,938 1,938 0 Kilmory Biomass Carbon Management 0 0 0 0 0 0 956 956 0 Oil to Gas Heating Conversions 0 0 0 0 0 0 182 182 0 Campbeltown Office Rationalisation 0 0 0 1 1 0 596 596 0 Helensburgh Office Rationalisation 0 0 0 300 300 0 11,838 11,838 0 Clean Energy - NDEEF1 0 0 0 224 224 0 1,331 1,331 0 Clean Energy - NDEEF2 0 0 0 50 50 0 1,140 1,140 0 Net Zero 0 0 0 0 0 0 366 366 0 CHORD Oban 0 0 0 626 626 0 7,905 7,905 0 CHORD Rothesay 2,600 2,600 0 6,737 6,737 0 24,012 24,012 0 CHORD - Helensburgh 0 0 0 28 28 0 6,557 6,557 0 CHORD Dunoon 0 0 0 27 27 0 12,522 12,522 0 Helensburgh Waterfront Deveopment 52 52 0 977 977 0 24,392 24,392 0 HWD - FFE (Funded by LA) 0 0 0 34 34 0 350 350 0 Kilmory Business Park Phase 2AA 0 0 0 560 560 0 1,129 1,129 0 Dunoon Pier OBC 0 0 0 0 0 0 2,844 2,844 0 Strategic Change Total 2,654 2,654 0 10,297 10,297 0 125,964 125,964 0 Total Expenditure 6,891 6,893 (2) 21,396 21,218 178 165,437 165,437 0 INCOME Asset Sustainability Education 0 0 0 (125) (125) 0 (125) (125) 0 Shared Offices 0 0 0 (3) (3) 0 (3) (3) 0 Asset Sustainability Total 0 0 0 (128) (128) 0 (578) (578) 0 Service Development Projects Sandbank Gaelic Pre Five Unit 0 0 0 0 0 0 (485) (485) 0 Bunessan Primary School - Gaelic Medium Improvements 0 0 0 0 0 0 (30) (30) 0 Early Learning and Childcare 0 0 0 0 0 0 (918) (918) 0 Early Years 1140 Hours 0 0 0 0 0 0 (6,300) (6,300) 0 Bowmore Primary School - Gaelic Medium Grant 0 0 0 0 0 0 (38) (38) 0 Service Development Total 0 0 0 0 0 0 (7,771) (7,771) 0 Strategic Change Helensburgh Office Rationalisation 0 0 0 0 0 0 (349) (349) 0 Dunoon Primary School 0 0 0 0 0 0 (137) (137) 0 H'burgh CHORD Public Realm Imprv 0 0 0 0 0 0 (570) (570) 0 Helensburgh Waterfront Development 0 0 0 (2,320) (2,320) 0 (7,979) (7,979) 0 HWD - FFE (Funded by LA) 0 0 0 0 0 0 (350) (350) 0 CHORD - Oban 0 0 0 0 0 0 (1,624) (1,624) 0 Net Departmental Total 6,891 6,893 (2) 17,969 17,791 178 145,090 145,090 0 31 October 2023 Total Project CostsFull Year This Financial YearCurrent Financial Year To Date Appendix 8 FINANCIAL SUMMARY NET EXPENDITURE - EXECUTIVE DIRECTOR DOUGLAS HENDRY Page 96
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ARGYLL AND BUTE COUNCIL - CAPITAL PLAN MONITORING REPORT Current Financial Year To Date Budget Actual (Over)/Under Variance Budget Year End Forecast (Over)/Under Variance Budget Forecast (Over)/Under Variance £000s £000s £000s £000s £000s £000s £000s £000s £000s EXPENDITURE Asset Sustainability Projects Flood Prevention 37 37 0 807 807 0 1,305 1,305 0 Coastal Protection 2 2 0 99 99 0 199 199 0 Coastal Change Adaptation 14 14 0 158 158 0 287 287 0 Bute Sea Wall Repairs 46 46 0 100 100 0 680 680 0 Helensburgh Flood Mitigation 1 1 0 428 428 0 428 428 0 Bridge Strengthening 199 199 0 1,336 1,336 0 1,686 1,686 0 Local Bridge Maintenance Fund 104 104 0 1,000 1,000 0 5,203 5,203 0 Roads Reconstruction 3,261 3,261 0 7,419 7,419 0 15,419 15,419 0 Roads Reconstruction - Helensburgh CHORD 0 0 0 47 47 0 47 47 0 Roads Reconstruction - Oban CHORD 0 0 0 3 3 0 3 3 0 Helensburgh CHORD - Signage etc 0 0 0 10 10 0 10 10 0 Lighting 0 0 0 890 890 0 1,040 1,040 0 Environmental Projects 191 191 0 650 650 0 1,021 1,021 0 Play Park Refurbishment 0 0 0 312 312 0 938 938 0 Public Convenience Upgrades 54 54 0 282 282 0 282 282 0 Footway Improvements 220 220 0 750 750 0 750 750 0 Glengorm - Capping 0 0 0 0 0 0 0 0 0 Glengorm - Cell and Transfer Station (PB) 85 89 (4) 85 89 (4) 85 89 (4) Gartbreck - Capping 6 6 0 6 6 0 200 200 0 EV Quick Chargers 0 0 0 62 62 0 62 62 0 Tobermory Car Park 0 0 0 96 96 0 96 96 0 Active Travel 0 0 0 389 389 0 389 389 0 Block Allocation - RIS 0 0 0 0 0 0 4,268 4,268 0 Server Sustainability 0 0 0 352 352 0 1,177 1,177 0 PC Replacement 306 306 0 518 518 0 1,835 1,835 0 Telecomms Network 242 242 0 256 256 0 480 480 0 Asset Sustainability Total 4,768 4,772 (4) 16,055 16,059 (4) 38,022 38,026 (4) Service Development Projects Preliminary design for Regional Transport projects 0 0 0 16 16 0 221 221 0 Campbeltown Old Quay 0 0 0 0 0 0 1,381 1,381 0 Fleet Management - Prudential Borrowing 784 784 0 2,187 2,187 0 4,861 4,861 0 Fleet Management 0 0 0 325 325 0 4,538 4,538 0 Lismore Ferry 0 0 0 15 15 0 672 672 0 Oban Depot Development Project 4 5 (1) 4 5 (1) 2,184 2,185 (1) Lochgilphead Depot Rationalisation 8 31 (23) 8 31 (23) 37 60 (23) Jackson's Quarry Refurbishment 0 0 0 0 0 0 285 285 0 Witchburn Road Demolition 0 0 0 0 0 0 158 158 0 Safe Streets, Walking and Cycling (CWSS) 0 0 0 370 370 0 3,383 3,383 0 SPT - bus infrastructure 0 0 0 0 0 0 1,430 1,430 0 Cycleways - H&L (FSPT) 7 7 0 300 300 0 3,402 3,402 0 Helensburgh Public Realm - Arts Strategy Fund 0 0 0 50 50 0 53 53 0 Town Centre Funds 252 252 0 708 718 (10) 4,319 4,329 (10) Rural Growth Deal 146 146 0 157 157 0 207 207 0 Dunoon Cycle Bothy 181 181 0 292 292 0 563 563 0 Dunoon STEM Hub 19 19 0 713 713 0 2,558 2,558 0 Ardrishaig North Active Travel 75 75 0 112 112 0 880 880 0 Nature Restoration Fund 0 0 0 346 346 0 346 346 0 Gibraltar Street Public Realm Improvements 0 0 0 222 222 0 250 250 0 Hermitage Park 0 0 0 26 26 0 3,388 3,388 0 West Coast UAV Innovation Logistics and Training Hub 0 0 0 0 0 0 0 0 0 Applications Projects 169 169 0 348 348 0 3,193 3,193 0 Service Development Total 1,645 1,669 (24) 6,199 6,233 (34) 38,309 38,343 (34) Strategic Change Projects Campbeltown Flood Scheme 6,516 6,516 0 9,860 9,874 (14) 15,215 15,215 0 Street Lighting LED Replacement 24 24 0 674 674 0 3,900 3,900 0 Harbour Investment Programme 522 522 0 3,200 3,200 0 91,292 91,292 0 Harbour Investment Programme - Non PB 0 0 0 43 43 0 43 43 0 TIF - Lorn/Kirk Road 0 0 0 1 1 0 2,170 2,170 0 TIF - Oban Airport Business Park 1 1 0 56 56 0 590 590 0 TIF - Halfway House Roundabout 0 0 0 574 56 518 640 640 0 Strategic Change Total 7,063 7,063 0 14,408 13,904 504 114,064 114,064 0 Total Expenditure 13,476 13,504 (28) 36,662 36,196 466 190,395 190,433 (38) INCOME Asset Sustainability EV Quick Chargers 0 0 0 (27) (27) 0 (27) (27) 0 Roads Reconstruction (430) (430) 0 (470) (470) 0 (470) (470) 0 Tobermory Car Park 0 0 0 (400) (400) 0 (400) (400) 0 Asset Sustainability Total (430) (430) 0 (1,097) (1,097) 0 (1,097) (1,097) 0 Service Development Projects Applications Projects 0 0 0 (46) (46) 0 (437) (437) 0 Safe Streets, Walking and Cycling 0 0 0 (376) (376) 0 (2,988) (2,988) 0 SPfT 0 0 0 (25) (25) 0 (1,268) (1,268) 0 Cycleways - H&L (FSPT) 0 0 0 (590) (590) 0 (3,502) (3,502) 0 Town Centre Funds 0 0 0 (625) (625) 0 (2,237) (2,237) 0 Rural Growth Deal (28) (28) 0 (177) (177) 0 (207) (207) 0 Dunoon STEM Hub 0 0 0 (2,050) (2,050) 0 (2,558) (2,558) 0 Ardrishaig North Active Travel 0 0 0 0 0 0 (50) (50) 0 Dunoon Cycle Bothy 0 0 0 (394) (394) 0 (563) (563) 0 Gibraltar Street Public Realm Improvements 0 0 0 0 0 0 (250) (250) 0 Hermitage Park 0 0 0 0 0 0 (3,319) (3,319) 0 Fleet Management - PB 0 0 0 (2,187) (2,187) 0 (4,861) (4,861) 0 Fleet Management (27) (27) 0 (27) (27) 0 (27) (27) 0 Lochgilphead Depot Rationalisation 0 0 0 0 0 0 0 0 0 Millpark Depot Demolition Insurance 0 0 0 0 0 0 (53) (53) 0 Oban Depot - Mill Park Insurance Claim 0 0 0 0 0 0 (1,681) (1,681) 0 Oban Depot - Appin Depot Sale 0 0 0 0 0 0 0 0 0 Oban Depot - Revenue Contribution 0 0 0 (67) (67) 0 0 0 0 Lismore Ferry 0 0 0 0 0 0 (500) (500) 0 Witchburn Road Demolition 0 0 0 0 0 0 (157) (157) 0 Service Development Total (55) (55) 0 (6,564) (6,564) 0 (24,658) (24,658) 0 Strategic Change Projects Campbeltown Flood 0 0 0 0 0 0 (270) (270) 0 Harbour PB (522) (522) 0 (3,200) (3,200) 0 (91,292) (91,292) 0 01 TIF - Lorn/Kirk Road 0 0 0 (113) (113) 0 (2,154) (2,154) 0 Strategic Change Total (522) (522) 0 (3,313) (3,313) 0 (93,716) (93,716) 0 Total Income (1,007) (1,007) 0 (10,974) (10,974) 0 (119,471) (119,471) 0 Net Departmental Total 12,469 12,497 (28) 25,688 25,222 466 70,924 70,962 (38) 31 October 2023 Full Year This Financial Year Total Project Costs FINANCIAL SUMMARY NET EXPENDITURE - EXECUTIVE DIRECTOR KIRSTY FLANAGAN Appendix 8 Page 97
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CAPITAL PLAN 2023-24 APPENDIX 9 Overall Summary Service Previous Years £000's 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s 2027-28 £000s Total Education 39,077 7,014 4,029 3,521 0 0 53,641 Shared Offices 17,661 1,909 3,344 977 0 0 23,891 ICT 2,529 1,474 1,593 1,221 0 0 6,817 RIS 26,197 31,275 43,957 55,023 2,733 0 159,185 DEG 18,331 3,409 2,653 0 0 0 24,393 HSCP 1,246 2,223 828 477 0 0 4,774 Live Argyll 1,274 1,083 636 427 0 0 3,420 CHORD 68,156 8,989 2,461 105 0 0 79,711 Overall Total 174,471 57,376 59,501 61,751 2,733 0 355,832 Page 98
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CAPITAL PLAN 2023-24 APPENDIX 9 Education Category Service Project Previous Years £000's 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s 2027-28 £000s Total £000s Asset Sustainability Education Asbestos Control/Removal Works 0 7 0 0 0 0 7 Block Allocation - Education 0 916 166 520 0 0 1,602 Digital Inclusion 20-21 0 9 0 0 0 0 9 Free School Meals 0 379 900 1,495 0 0 2,774 Homeless Houses - Housing Quality Standard 0 1 0 0 0 0 1 Internal Refurbishment Budget 0 7 0 0 0 0 7 Lochgilphead Primary School Demolition 0 0 0 0 0 0 0 Pre-5's/Nurseries 0 0 0 0 0 0 0 Primary Schools 0 3,370 2,420 1,280 0 0 7,070 School Houses - Housing Quality Standard 0 13 0 0 0 0 13 Secondary Schools 0 1,129 543 226 0 0 1,898 Asset Sustainability Total 0 5,831 4,029 3,521 0 0 13,381 Service Development Education Ardrishaig Primar School - Pre Five Extension 2 0 0 0 0 0 2 Bowmore Primary School - Gaelic Medium Grant 0 38 0 0 0 0 38 Bowmore Primary School - Pre Five Unit 149 0 0 0 0 0 149 Bunessan Primary School - Gaelic Medium Improvements 120 0 0 0 0 0 120 Clyde Cottage - 600 hours provision 556 0 0 0 0 0 556 CO2 Monitoring - Covid Mitigation in Schools 79 113 0 0 0 0 192 Craignish Primary School - Pre Five Extension (600 hours funding) 400 0 0 0 0 0 400 Early Learning and Childcare 850 0 0 0 0 0 850 Early Learning and Childcare - 1140 Hours 7,454 320 0 0 0 0 7,774 Early Learning and Childcare - 1140 Hours - CFCR 1,379 0 0 0 0 0 1,379 Iona Primary School - Pre Five Unit (600 hours funding) 490 0 0 0 0 0 490 Islay High & Rosneath PS Pitches 719 0 0 0 0 0 719 Lochgoilhead Primary School - Pre Five Unit (600 hours funding) 391 0 0 0 0 0 391 Park Primary Extension and Pre Fives Unit 341 0 0 0 0 0 341 Sandbank Gaelic Pre Five Unit 491 0 0 0 0 0 491 Service Development Total 13,421 471 0 0 0 0 13,892 Strategic Change Education Campbeltown Schools Redevelopment 2,092 38 0 0 0 0 2,130 Dunoon Primary School 10,635 234 0 0 0 0 10,869 Kirn Primary School 10,085 34 0 0 0 0 10,119 Replacement of Oban High School 2,844 406 0 0 0 0 3,250 Strategic Change Total 25,656 712 0 0 0 0 26,368 Overall Total 39,077 7,014 4,029 3,521 0 0 53,641 Page 99
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CAPITAL PLAN 2023-24 APPENDIX 9 Shared Office Category Service Project Previous Years £000's 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s 2027-28 £000s Total £000s Asset Sustainability Shared Offices 5-7 East Clyde Street - Coastal Communities Fund 0 0 0 0 0 0 0 Argyll House, Dunoon 0 9 0 0 0 0 9 Asbestos Capital Property Works 0 51 0 0 0 0 51 Block Allocation 0 152 298 427 0 0 877 Bowmore Area Office 0 76 0 0 0 0 76 Burnett Building 0 2 108 0 0 0 110 Capital Property Works 0 38 0 0 0 0 38 Fire Risk Assessment Works 0 14 0 0 0 0 14 Helensburgh and Lomond Civic Centre - Emergency Heating Pipework 0 130 0 0 0 0 130 Hill Street Dunoon Rewire 0 33 0 0 0 0 33 Kilmory Castle 0 0 1,409 0 0 0 1,409 Legionella Control Works 0 144 0 0 0 0 144 Manse Brae District Office 0 0 0 0 0 0 0 Manse Brae Roads Office 0 2 0 0 0 0 2 Our Modern Workspace 0 683 480 0 0 0 1,163 Asset Sustainability Total 0 1,334 2,295 427 0 0 4,056 Strategic Change Shared Offices Campbeltown Office Rationalisation 595 1 0 0 0 0 596 Carbon Management - Group Heating Conversion Project (Prudential Borrowing)1,938 0 0 0 0 0 1,938 Carbon Management Business Cases (FPB) 201 0 0 0 0 0 201 Carbon Management Capital Property Works 16/17 19 0 0 0 0 0 19 Carbon Management Fuel Conversions (FPB) 107 0 0 0 0 0 107 Clean Energy - NDEEF1 964 224 143 0 0 0 1,331 Clean Energy - NDEEF2 0 50 540 550 0 0 1,140 Helensburgh Office Rationalisation (FPB,REC) 11,538 300 0 0 0 0 11,838 Kilmory Biomass Project OBC (FPB,REV) 956 0 0 0 0 0 956 Net Zero 0 0 366 0 0 0 366 Non-NPDO Schools PV Panel Installations 400 0 0 0 0 0 400 NPDO Schools Solar PV Panel Installations 761 0 0 0 0 0 761 Oil to Gas Heating Conversions (FPB) 182 0 0 0 0 0 182 Strategic Change Total 17,661 575 1,049 550 0 0 19,835 Overall Total 17,661 1,909 3,344 977 0 0 23,891 Page 100
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CAPITAL PLAN 2023-24 APPENDIX 9 Major Projects Category Service Project Previous Years £000's 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s 2027-28 £000s Total £000s Strategic Change CHORD CHORD - Dunoon 12,495 27 0 0 0 0 12,522 CHORD - Helensburgh -Public Realm Imprv 6,529 28 0 0 0 0 6,557 CHORD - Oban 7,279 626 0 0 0 0 7,905 CHORD - Rothesay 15,231 6,737 1,973 71 0 0 24,012 Helensburgh Waterfront Development 23,415 977 0 0 0 0 24,392 HWD - FFE 316 34 0 0 0 0 350 Kilmory Business Park Phase 2AA 47 560 488 34 0 0 1,129 OBC for Dunoon Pier 2,844 0 0 0 0 0 2,844 Strategic Change Total 68,156 8,989 2,461 105 0 0 79,711 Overall Total 68,156 8,989 2,461 105 0 0 79,711 Page 101
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CAPITAL PLAN 2023-24 APPENDIX 9 ICT Category Service Project Previous Years £000's 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s 2027-28 £000s Total £000s Asset Sustainability ICT Block Allocation - ICT 0 0 132 0 0 0 132 PC Replacement 0 518 648 669 0 0 1,835 Server Sustainability 0 352 425 400 0 0 1,177 Telecomms Network 0 256 72 152 0 0 480 Asset Sustainability Total 0 1,126 1,277 1,221 0 0 3,624 Service Development ICT Applications Projects 2,529 348 316 0 0 0 3,193 Service Development Total 2,529 348 316 0 0 0 3,193 Overall Total 2,529 1,474 1,593 1,221 0 0 6,817 Page 102
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CAPITAL PLAN 2023-24 APPENDIX 9 Roads and Infrastructure Services Category Service Project Previous Years £000's 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s 2027-28 £000s Total £000s Asset Sustainability RIS Block Allocation 0 0 0 4,268 0 0 4,268 Bridge Strengthening 0 1,336 350 0 0 0 1,686 Bute Sea Wall Repairs 0 100 580 0 0 0 680 Coastal Change Adaptation 0 158 129 0 0 0 287 Coastal Protection 0 99 100 0 0 0 199 Environmental Projects 0 650 371 0 0 0 1,021 EV Quick Chargers 0 62 0 0 0 0 62 Flood Prevention 0 807 305 155 38 0 1,305 Footway Improvements 0 750 0 0 0 0 750 Glengorm - Capping 0 0 0 0 0 0 0 Glengorm - Cell and Transfer Station (PB) 0 85 0 0 0 0 85 Helensburgh CHORD - Signage etc 0 10 0 0 0 0 10 Helensburgh Flood Mitigation 0 428 0 0 0 0 428 Investment in Active Travel 0 389 0 0 0 0 389 Lighting 0 890 150 0 0 0 1,040 Local Bridge Maintenance Fund 0 1,000 4,000 203 0 0 5,203 Plant and Machinery 0 0 0 0 0 0 0 Public Convenience Upgrades 0 282 0 0 0 0 282 Roads Reconstruction 0 7,419 8,000 0 0 0 15,419 Roads Reconstruction - Helensburgh CHORD 0 47 0 0 0 0 47 Roads Reconstruction - Oban CHORD 0 3 0 0 0 0 3 Tobermory Car Park 0 96 0 0 0 0 96 Asset Sustainability Total 0 14,923 14,220 5,017 38 0 34,198 Service Development RIS Campbeltown Old Quay 1,381 0 0 0 0 0 1,381 Depot Rationalisation 0 0 0 0 0 0 0 Fleet Management - Prudential Borrowing 2,674 2,187 0 0 0 0 4,861 Jackson's Quarry Refurbishment 285 0 0 0 0 0 285 Lismore Ferry Replacement 637 15 20 0 0 0 672 Lochgilphead Depot Rationalisation 29 8 0 0 0 0 37 Oban Depot Development 2,180 4 0 0 0 0 2,184 Preliminary design for Regional Transport projects (tif) 205 16 0 0 0 0 221 Witchburn Road Demolition 158 0 0 0 0 0 158 Service Development Total 10,582 2,555 1,200 0 0 0 14,337 Strategic Change RIS Campbeltown Flood Scheme 4,992 9,874 343 6 0 0 15,215 Harbour Investment Programme PB 7,397 3,200 28,000 50,000 2,695 0 91,292 Street Lighting LED Replacement 3,226 674 0 0 0 0 3,900 Strategic Change Total 15,615 13,748 28,343 50,006 2,695 0 110,407 Overall Total 26,197 31,226 43,763 55,023 2,733 0 158,942 Page 103
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CAPITAL PLAN 2023-24 APPENDIX 9 Development and Economic Growth Category Service Project Previous Years £000's 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s 2027-28 £000s Total £000s Service Development DEG Ardrishaig North Active Travel 755 112 13 0 0 0 880 Cycleways - H&L (FSPT) 2,812 300 290 0 0 0 3,402 Dunoon Cycle Bothy 259 292 12 0 0 0 563 Dunoon STEM Hub 95 713 1,750 0 0 0 2,558 Gibraltar Street Public Realm Improvements 28 222 0 0 0 0 250 Helensburgh Public Realm - Arts Strategy Fund 3 50 0 0 0 0 53 Hermitage Park 3,362 26 0 0 0 0 3,388 Nature Restoration Fund 0 346 0 0 0 0 346 Rural Growth Deal 50 157 0 0 0 0 207 Safe Streets, Walking and Cycling (CWSS) 3,013 370 0 0 0 0 3,383 SPT - bus infrastructure 1,405 0 25 0 0 0 1,430 Town Centre Funds 3,611 708 0 0 0 0 4,319 Service Development Total 15,393 3,296 2,090 0 0 0 20,779 Strategic Change DEG 01 TIF - Lorn/Kirk Road 2,169 1 0 0 0 0 2,170 05 TIF - North Pier Extension 214 0 0 0 0 0 214 09 TIF - Oban Airport Business Park 489 56 45 0 0 0 590 TIF - Halfway House Roundabout 66 56 518 0 0 0 640 Strategic Change Total 2,938 113 563 0 0 0 3,614 Overall Total 18,331 3,409 2,653 0 0 0 24,393 Page 104
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CAPITAL PLAN 2023-24 APPENDIX 9 Health & Social Care Partnership Category Service Project Previous Years £000's 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s 2027-28 £000s Total £000s Asset Sustainability HSCP Ardfenaig 0 24 0 0 0 0 24 Block Allocation 0 779 292 184 0 0 1,255 Capital Property Works 0 79 0 0 0 0 79 Digitalising telecare 0 100 0 0 0 0 100 Dunoon Hostel 0 0 0 0 0 0 0 Eadar Glinn 0 0 0 0 0 0 0 East King Street Childrens Home 0 58 0 0 0 0 58 Glencruitten Hostel 0 81 36 143 0 0 260 Gortonvogie 0 1 0 0 0 0 1 Greenwood/Woodlands 0 216 0 0 0 0 216 Lochgilphead Resource Centre 0 16 0 0 0 0 16 Rothesay Community Education Centre 0 0 0 0 0 0 0 Shellach View 0 142 0 0 0 0 142 Thomson Home Rothesay 0 0 0 0 0 0 0 Tigh An Rudha HFE 0 600 500 150 0 0 1,250 Tobermory Top Flat 0 22 0 0 0 0 22 Asset Sustainability Total 0 2,169 828 477 0 0 3,474 Service Development HSCP Dunclutha Childrens Home 1,246 54 0 0 0 0 1,300 Service Development Total 1,246 54 0 0 0 0 1,300 Overall Total 1,246 2,223 828 477 0 0 4,774 Page 105
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CAPITAL PLAN 2023-24 APPENDIX 9 Live Argyll Category Service Project Previous Years £000's 2023-24 £000s 2024-25 £000s 2025-26 £000s 2026-27 £000s 2027-28 £000s Total £000s Asset Sustainability Live Argyll Aqualibrium 0 340 48 40 0 0 428 Corran Halls Gaelic Centre 0 113 46 84 0 0 243 Inveraray CARS 0 0 0 0 0 0 0 Kintyre Community Education Centre - Lift Shaft Refurbishment 0 2 0 0 0 0 2 LA - Indoor Cycles 0 0 0 0 0 0 0 Lochgilphead Library Relocation 0 14 0 0 0 0 14 Moat Centre (Roofing) 0 0 0 0 0 0 0 Queen's Hall - Partition Wall 0 0 0 0 0 0 0 Riverside Leisure Centre - Health Suite Upgrade 0 204 0 0 0 0 204 Rothesay Swimming Pool 0 40 25 50 0 0 115 The Moat Centre - Gym Store 0 0 0 0 0 0 0 The Moat Centre - Heating Upgrade 0 0 0 0 0 0 0 The Moat Centre - Window Upgrade 0 0 0 0 0 0 0 Victoria Halls, Helensburgh 0 78 0 0 0 0 78 Asset Sustainability Total 0 1,062 636 427 0 0 2,125 Service Development Live Argyll Riverside Leisure Centre Refurbishment 1,245 0 0 0 0 0 1,245 Service Development Total 1,245 0 0 0 0 0 1,245 Strategic Change Live Argyll Carbon Management 29 21 0 0 0 0 50 Strategic Change Total 29 21 0 0 0 0 50 Overall Total 1,274 1,083 636 427 0 0 3,420 Page 106
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ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE FINANCIAL SERVICES 7 DECEMBER 2023 TREASURY MANAGEMENT MONITORING REPORT – 31 OCTOBER 2023 1. EXECUTIVE SUMMARY 1.1. This report sets out the Council’s treasury management position for the period 1 September 2023 to 31 October 2023 and includes information on: • Overall borrowing position • Borrowing activity • Investment activity • Economic background • Interest rate forecast • Prudential Indicators 1.2. Estimated borrowing is below the Capital Financing Requirement for the period to 31 October 2023, at this stage in the financial year capital expenditure is below target. During the period the Council took the opportunity to repay three loans at a discounted price which generated a one-off gain to the Loans Fund of £0.294m. The repayment was funded by utilising existing cash balances therefore no additional borrowing was required to repay these loans and it is unlikely that the Council will take out longer term loans in the short term. The gain will be carried forward and will be an option for Elected Members to consider when setting the 2024-25 budget. 1.3. The net movement in external borrowing in the period 1 September 2023 to 31 October 2023 was a decrease of £12m. 1.4. The levels of investments were £72.251m at 31 October 2023. The rate of return achieved was 5.105% compared to the target SONIA rate which was 5.187%. 1.5 The Council has significant cash balances which are invested in accordance with its Annual Treasury Management Strategy on the basis of security first, liquidity second and then return. Page 107
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ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE FINANCIAL SERVICES 7 DECEMBER 2023 TREASURY MANAGEMENT MONITORING REPORT – 31 OCTOBER 2023 2. INTRODUCTION 2.1. This report sets out the Council’s treasury management position for the period 1 September 2023 to 31 October 2023 and includes information on: • Overall borrowing position • Borrowing activity • Investment activity • Economic background • Interest rate forecast • Prudential Indicators 3. DETAIL Overall Borrowing Position 3.1. The table below details the estimated capital financing requirement (CFR) and compares this with the estimated level of external debt at 31 March 2023. The CFR represents the underlying need for the Council to borrow to fund its fixed assets and accumulated capital expenditure. Forecast Forecast Forecast 2023/24 2024/25 2025/26 £000 £000 £000 CFR at 1 April 291,782 295,621 320,708 Net Capital Expenditure 15,569 37,279 51,906 Less Loans Fund Principal Repayments (5,950) (6,254) (6,573) Less: NPDO Repayment (5,780) (5,938) (6,235) Estimated CFR 31 March 295,621 320,708 359,806 Less Funded by NPDO (111,564) (111,784) (106,846) Estimated Net CFR 31 March 184,057 208,924 252,960 Estimated External Borrowing at 31 March 176,532 221,513 261,510 Gap 7,525 (12,589) (8,550) Page 108
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3.2. Borrowing is below the Capital Financing Requirement for the period to 31 October 2023. During the period the Council took the opportunity to repay three loans at a discounted price which generated a one-off gain to the Loans Fund of £0.294m. The repayment was funded by utilising existing cash balances therefore no additional borrowing was required to repay these loans. The gain will be carried forward and will be an option for Elected Members to consider when setting the 2024-25 budget. Whilst borrowing rates are still comparatively low, the Council has delayed taking out any new long term borrowing, as rates are expected to drop towards the end of 2024 plus the Council has significant cash balances which reduces the need to borrow in the short term. 3.3. The Council’s Treasury Management Strategy states that any decision to borrow in advance will be within forward approved Capital Financing Requirement estimates. 3.4. The Council’s estimated net capital financing requirement at 31 October 2023 is £184.057m. The table below shows how this has been financed. £112.484m is funded by loans and there are substantial internal balances of £148.824m of which £72.251m are currently invested, as detailed in section 3.7, leaving a net internal balance of £71.573m. Position at 31/08/23 Position at 31/10/23 £000 £000 Loans 125,440 112,484 Net Internal Balances 65,313 71,573 Total CFR 190,753 184,057 3.5. During the period from 1 September 2023 to 31 October 2023, £12m of loans were repaid and no new borrowing was taken. The analysis of the movement in borrowing is shown in the table below: Actual £m (12) 0 Net Movement in External Borrowing (12) External Loans Repaid 1st September 2023 to 31st October 2023 Borrowing undertaken 1st September 2023 to 31st October 2023 3.6. The table below summarises the movement in the level and rate of temporary borrowing at the start and end of the period. £000 % Rate Temp borrowing at 31st August 2023 283 3.40% Temp borrowing at 31st October 2023 328 4.40% Page 109
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Investment Activity 3.7 The average rate of return achieved in the Council’s investments to 31 October 2023 was 5.105% compared to the SONIA (Sterling Overnight Index Average) rate for the same period of 5.187%. The Council’s rate of return is marginally less than SONIA due to the rapid rise in interest rates which increased SONIA faster than the Council was able to redeem its existing lower rated investments. At 31 October 2023 the Council had £72.251m of short term investments at an average rate of 5.105%. The table below details the counterparties that the investments were placed with, the maturity date, the interest rate and the credit rating applicable for each counterparty. Counterparty Maturity Amount £000 Interest Rate Rating S&P Clydesdale Bank Instant 251 5.15% Short Term A-2, Long Cambridgeshire County Council 22/01/2024 5,000 1.00% AA London Borough of Croydon 10/10/2024 5,000 4.10% AA National Bank of Kuwait 09/04/2024 7,500 5.13% Short Term A-1, Long First Abu Dhabi Bank 09/05/2024 5,000 5.27% Short Term A-1+, National Bank of Kuwait 10/11/2023 2,500 5.00% Short Term A-1, Long Goldman Sachs 10/11/2023 2,500 4.91% Short Term A-1, Long London Borough of Croydon 10/06/2024 5,000 5.30% AA Close Brothers 31/01/2024 2,500 5.87% Short Term A-1, Long First Abu Dhabi Bank 01/02/2024 5,000 5.93% Short Term A-1+, First Abu Dhabi Bank 09/08/2024 5,000 6.16% Short Term A-1+, Goldman Sachs 16/02/2024 5,000 5.93% Short Term A-1, Long Australia and New Zealand Banking Group 16/02/2024 5,000 5.92% Short Term A-1+, MMF- Federated Call 2,500 0.00% AAA MMF - Legal and General Call 14,500 0.00% AAA Total 72,251 3.8 All investments and deposits are in accordance with the Council’s approved list of counterparties and within the limits and parameters defined in the Treasury Management Practices. The counterparty list is constructed based on assessments by leading credit reference agencies adjusted for additional market information available in respect of counterparties. 3.9 The Council has significant cash balances which are invested in accordance with its Annual Treasury Management Strategy. These cash balances are in excess of what is required for normal operating purposes but the economic environment for investments has improved over the last few months with an increase in interest rates, making investing these monies easier than in previous years. Page 110
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Economic and Interest Rate Forecasts 3.10 The latest economic background is shown in Appendix 1 with the interest rate forecast in Appendix 2. Prudential Indicators 3.11 The prudential indicators for 2023-24 are attached in Appendix 3. 4. CONCLUSION 4.1 In the period from 1 September 2023 to 31 October 2023, the Council’s borrowing decreased by £12m, and is currently below the Capital Financing Requirement. There are substantial internal balances, of which £72.251m is currently invested. The investment returns were 5.105%. 5. IMPLICATIONS 5.1 Policy – None. 5.2 Financial – Complies with Annual Treasury Strategy. 5.3 Legal – None. 5.4 HR – None. 5.5 Fairer Duty Scotland – None. 5.5.1 Equalities – protected characteristics – None. 5.5.2 Socio-economic Duty – None. 5.5.3 Islands – None. 5.6 Climate Change – None. 5.7 Risk – None. 5.8 Customer Service – None. Kirsty Flanagan Section 95 Officer 2 November 2023 Policy Lead for Finance and Commercial Services - Councillor Gary Mulvaney Appendix 1 – Economic Background Appendix 2 – Interest Rate Forecast Appendix 3 – Prudential Indicators For further information contact Anne Blue, Head of Financial Services anne.blue@argyll-bute.gov.uk Page 111
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Appendix 1 – Economics Update • The first half of 2023/24 saw: - Interest rates rise by a further 100bps, taking Bank Rate from 4.25% to 5.25% and, possibly, the peak in the tightening cycle. - Short, medium and long-dated gilts remain elevated as inflation continually surprised to the upside. - A 0.5% m/m decline in real GDP in July, mainly due to more strikes. - CPI inflation falling from 8.7% in April to 6.7% in August, its lowest rate since February 2022, but still the highest in the G7. - Core CPI inflation declining to 6.2% in August from 7.1% in April and May, a then 31 years high. - A cooling in labour market conditions, but no evidence yet that it has led to an easing in wage growth (as the 3myy growth of average earnings rose to 7.8% in August, excluding bonuses). • The 0.5% m/m fall in GDP in July suggests that underlying growth has lost momentum since earlier in the year. Some of the weakness in July was due to there being almost twice as many working days lost to strikes in July (281,000) than in June (160,000). But with output falling in 10 out of the 17 sectors, there is an air of underlying weakness. • The fall in the composite Purchasing Managers Index from 48.6 in August to 46.8 in September left it at its lowest level since COVID-19 lockdowns reduced activity in January 2021. At face value, it is consistent with the 0.2% q/q rise in real GDP in the period April to June, being followed by a contraction of up to 1% in the second half of 2023. • The 0.4% m/m rebound in retail sales volumes in August is not as good as it looks as it partly reflected a pickup in sales after the unusually wet weather in July. Sales volumes in August were 0.2% below their level in May, suggesting much of the resilience in retail activity in the first half of the year has faded. • As the growing drag from higher interest rates intensifies over the next six months, we think the economy will continue to lose momentum and soon fall into a mild recession. Strong labour demand, fast wage growth and government handouts have all supported household incomes over the past year. And with CPI inflation past its peak and expected to decline further, the economy has got through the cost-of- living crisis without recession. But even though the worst of the falls in real household disposable incomes are behind us, the phasing out of financial support packages provided by the government during the energy crisis means real incomes are unlikely to grow strongly. Higher interest rates will soon bite harder too. We expect the Bank of England to keep interest rates at the probable peak of 5.25% until the second half of 2024. Mortgage rates are likely to stay above 5.0% for around a year. • The tightness of the labour market continued to ease, with employment in the three months to July falling by 207,000. The further decline in the number of job vacancies from 1.017m in July to 0.989m in August suggests that the labour market has loosened a bit further since July. That is the first time it has fallen below 1m since July 2021. At 3.0% in July, and likely to have fallen to 2.9% in August, the job vacancy rate is getting closer to 2.5%, which would be consistent with slower wage growth. Meanwhile, the 48,000 decline in the supply of workers in the three months to July offset some of the loosening in the tightness of the labour market. That was due to a 63,000 increase in inactivity in the three months to July as more people left the labour market due to long term sickness or to enter education. The supply of labour is still 0.3% below its pre-pandemic February 2020 level. • But the cooling in labour market conditions still has not fed through to an easing in wage growth. While the monthly rate of earnings growth eased sharply from an upwardly revised +2.2% in June to -0.9% in July, a lot of that was due to the one-off bonus payments for NHS Page 112
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staff in June not being repeated in July. The headline 3myy rate rose from 8.4% (revised up from 8.2%) to 8.5%, which meant UK wage growth remains much faster than in the US and in the Euro-zone. Moreover, while the Bank of England’s closely watched measure of regular private sector wage growth eased a touch in July, from 8.2% 3myy in June to 8.1% 3myy, it is still well above the Bank of England’s prediction for it to fall to 6.9% in September. • CPI inflation declined from 6.8% in July to 6.7% in August, the lowest rate since February 2022. The biggest positive surprise was the drop in core CPI inflation, which declined from 6.9% to 6.2%. That reverses all the rise since March and means the gap between the UK and elsewhere has shrunk (US core inflation is 4.4% and in the Euro-zone it is 5.3%). Core goods inflation fell from 5.9% to 5.2% and the further easing in core goods producer price inflation, from 2.2% in July to a 29-month low of 1.5% in August, suggests it will eventually fall close to zero. But the really positive development was the fall in services inflation from 7.4% to 6.8%. That also reverses most of the rise since March and takes it below the forecast of 7.2% the Bank of England published in early August. • In its latest monetary policy meeting on 20 September, the Bank of England left interest rates unchanged at 5.25%. The weak August CPI inflation release, the recent loosening in the labour market and the downbeat activity surveys appear to have convinced the Bank of England that it has already raised rates far enough. The minutes show the decision was “finely balanced”. Five MPC members (Bailey, Broadbent, Dhingra, Pill and Ramsden) voted for no change and the other four (Cunliffe, Greene, Haskel and Mann) voted for a 25bps hike. • Like the US Fed, the Bank of England wants the markets to believe in the higher for longer narrative. The statement did not say that rates have peaked and once again said if there was evidence of more persistent inflation pressures “further tightening in policy would be required”. Governor Bailey stated, “we’ll be watching closely to see if further increases are needed”. The Bank also retained the hawkish guidance that rates will stay “sufficiently restrictive for sufficiently long”. • This narrative makes sense as the Bank of England does not want the markets to decide that a peak in rates will be soon followed by rate cuts, which would loosen financial conditions and undermine its attempts to quash inflation. The language also gives the Bank of England the flexibility to respond to new developments. A rebound in services inflation, another surge in wage growth and/or a further leap in oil prices could conceivably force it to raise rates at the next meeting on 2nd November, or even pause in November and raise rates in December. • The yield on 10-year Gilts fell from a peak of 4.74% on 17th August to 4.44% on 29th September, mainly on the back of investors revising down their interest rate expectations. But even after their recent pullback, the rise in Gilt yields has exceeded the rise in most other Developed Market government yields since the start of the year. Looking forward, once inflation falls back, Gilt yields are set to reduce further. A (mild) recession over the next couple of quarters will support this outlook if it helps to loosen the labour market (higher unemployment/lower wage increases). • The pound weakened from its cycle high of $1.30 in the middle of July to $1.21 in late September. In the first half of the year, the pound bounced back strongly from the Truss debacle last autumn. That rebound was in large part driven by the substantial shift up in UK interest rate expectations. However, over the past couple of months, interest rate expectations have dropped sharply as inflation started to come down, growth faltered, and the Bank of England called an end to its hiking cycle. • The FTSE 100 has gained more than 2% since the end of August, from around 7,440 on 31st August to 7,608 on 29th September. The rebound has been primarily driven by higher energy prices which boosted the valuations of energy companies. The FTSE 100’s relatively high concentration of energy companies helps to explain why UK equities outperformed both US and Euro-zone equities in September. Nonetheless, as recently as 21st April the FTSE 100 stood at 7,914. Page 113
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Appendix 2 – Interest Rate Forecast The Council has appointed Link Group as its treasury advisors and part of their service is to assist the Council to formulate a view on interest rates. The PWLB rate forecasts below are based on the Certainty Rate (the standard rate minus 20 bps) which has been accessible to most authorities since 1st November 2012. Link now expect the MPC will keep Bank Rate at 5.25% for the remainder of 2023 and the first half of 2024 to combat on-going inflationary and wage pressures. They do not think that the MPC will increase Bank Rate above 5.25%, but it is possible. Our current PWLB rate forecasts below are based on the Certainty Rate. • The Link forecast for average earnings are averages i.e., rates offered by individual banks may differ significantly from these averages, reflecting their different needs for borrowing short-term cash at any one point in time. A SUMMARY OVERVIEW OF THE FUTURE PATH OF BANK RATE • Our central forecast for interest rates was previously updated on 25 September and reflected a view that the MPC would be keen to further demonstrate its anti-inflation credentials by keeping Bank Rate at 5.25% until at least H2 2024. We expect rate cuts to start when both the CPI inflation and wage/employment data are supportive of such a move, and that there is a likelihood of the overall economy enduring at least a mild recession over the coming months, although most recent GDP releases have surprised with their on-going robustness. • Naturally, timing on this matter will remain one of fine judgment: cut too soon, and inflationary pressures may well build up further; cut too late and any downturn or recession may be prolonged. • In the upcoming months, our forecasts will be guided not only by economic data releases and clarifications from the MPC over its monetary policies and the Government over its fiscal policies, but also international factors such as policy development in the US and Europe, the provision of fresh support packages to support the faltering recovery in China as well as the on-going conflict between Russia and Ukraine, and Gaza and Israel. • On the positive side, consumers are still anticipated to be sitting on some excess savings left over from the pandemic, which could cushion some of the impact of the above challenges and may be the reason why the economy is performing somewhat better at this stage of the economic cycle than may have been expected. However, as noted previously, most of those excess savings are held by more affluent households whereas lower income families already spend nearly all their income on essentials such as food, energy and rent/mortgage payments. PWLB RATES • Gilt yield curve movements have broadened since our last Newsflash. The short part of the curve has not moved far but the longer-end continues to reflect inflation concerns. At the time of writing there is 60 basis points difference between the 5 and 50 year parts of Page 114
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the curve. The balance of risks to the UK economy: - • The overall balance of risks to economic growth in the UK is to the downside. Downside risks to current forecasts for UK gilt yields and PWLB rates include: - • Labour and supply shortages prove more enduring and disruptive and depress economic activity (accepting that in the near-term this is also an upside risk to inflation and, thus, could keep gilt yields high for longer). • The Bank of England has increased Bank Rate too fast and too far over recent months, and subsequently brings about a deeper and longer UK recession than we currently anticipate. • UK / EU trade arrangements – if there was a major impact on trade flows and financial services due to complications or lack of co-operation in sorting out significant remaining issues. • Geopolitical risks, for example in Ukraine/Russia, the Middle East, China/Taiwan/US, Iran and North Korea, which could lead to increasing safe-haven flows. Upside risks to current forecasts for UK gilt yields and PWLB rates: - • Despite the recent tightening to 5.25%, the Bank of England proves too timid in its pace and strength of increases in Bank Rate and, therefore, allows inflationary pressures to remain elevated for a longer period within the UK economy, which then necessitates Bank Rate staying higher for longer than we currently project. • The pound weakens because of a lack of confidence in the UK Government’s pre- election fiscal policies, resulting in investors pricing in a risk premium for holding UK sovereign debt. • Longer-term US treasury yields rise strongly if inflation remains more stubborn there than the market currently anticipates, consequently pulling gilt yields up higher. (We saw some movements of this type through October although generally reversed in the last week or so.) • Projected gilt issuance, inclusive of natural maturities and QT, could be too much for the markets to comfortably digest without higher yields compensating. Page 115
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Appendix 3 – Prudential Indicators PRUDENTIAL INDICATOR 2023-24 2023-24 2024-25 2025-26 (1). EXTRACT FROM BUDGET Forecast Outturn Original Estimate Forecast Outturn Forecast Outturn Capital Expenditure £'000 £'000 £'000 £'000 Non - HRA 15,569 43,110 37,279 51,906 TOTAL 15,569 43,110 37,279 51,906 Ratio of financing costs to net revenue stream Non - HRA 4.25% 4.37% 4.40% 4.43% Net borrowing requirement brought forward 1 April * 291,782 304,498 372,359 320,708 carried forward 31 March * 295,621 372,359 320,708 359,806 in year borrowing requirement 3,839 67,861 (51,651) 39,098 In year Capital Financing Requirement Non - HRA 3,839 67,861 (51,651) 39,098 TOTAL 3,839 67,861 (51,651) 39,098 Capital Financing Requirement as at 31 March Non - HRA 295,621 372,359 320,708 359,806 TOTAL 295,621 372,359 320,708 359,806 Page 116
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PRUDENTIAL INDICATOR 2023-24 2024-25 2025-26 (2). TREASURY MANAGEMENT PRUDENTIAL INDICATORS £'M £'M £'M Authorised limit for external debt - borrowing 268 283 305 other long term liabilities 112 113 108 TOTAL 380 396 413 Operational boundary for external debt - borrowing 263 278 300 other long term liabilities 109 110 105 TOTAL 372 388 405 Upper limit for fixed interest rate exposure Principal re fixed rate borrowing 190% 190% 190% Upper limit for variable rate exposure Principal re variable rate borrowing 60% 60% 60% Upper limit for total principal sums invested for over 364 days £20m £20m £20m (per maturity date) Maturity structure of new fixed rate borrowing during 2023/24 under 12 months 12 months and within 24 months 24 months and within 5 years 5 years and within 10 years 10 years and above 30% 0% 40% 0% 100% 0% upper limit lower limit 30% 0% 30% 0% Page 117
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ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE FINANCIAL SERVICES 7 DECEMBER 2023 RESERVES AND BALANCES – UPDATE AS AT 31 OCTOBER 2023 1 EXECUTIVE SUMMARY 1.1 The main purpose of this report is to advise Members of the overall level of reserves held by the Council as well as providing detail on the monitoring of the earmarked balances held within the General Fund. 1.2 The Council has a total of £666.354m unusable reserves that are not backed with resources. They are required purely for accounting purposes. 1.3 At 31 March 2023 the Council had a total of £93.828m of usable reserves. Of this: • £2.916m relates to the Repairs and Renewals Fund • £4.503m relates to Capital Funds • £86.409m was held in the General Fund, with £79.466m of this balance earmarked for specific purposes. 1.4 During 2023-24, the amount of £4.776m which was previously agreed to be utilised from the one-off reprofiling gain from the Loans Fund Review was drawn down into Earmarked Reserves to be used to fund the Capital Programme as detailed in paragraph 3.5.1. This results in the total earmarked balance increasing to £84.242m. 1.5 Of the earmarked balance of £84.242m: • £41.505m is invested or committed for major initiatives/capital projects • £4.629m has already been drawn down • £19.434m is still to be drawn down in 2023-24 • £18.674m is planned to be spent in future years 1.6 The Council’s General Fund contingency level is set at 2% of net expenditure for 2023-24 which equates to £5.691m. At the beginning of the financial year there was £1.252m of unallocated General Fund Balance (over and above contingency). After taking into consideration the budgeted allocation to the General Fund agreed by Council on 23 February 2023, the current forecast outturn position for 2023-24 and the proposed allocation for floral displays, the Council is forecast to have a £1.183m surplus over contingency. Page 118
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ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE FINANCIAL SERVICES 7 DECEMBER 2023 RESERVES AND BALANCES - UPDATE AS AT 31 OCTOBER 2023 2. INTRODUCTION 2.1 This report outlines current balances on the Council’s reserves, both usable and unusable. It also provides detail on the monitoring of the earmarked balances within the General Fund. 3. DETAIL 3.1 Types of Reserves 3.1.1 Usable Reserves - Councils have powers to establish certain resource backed reserves which can be used to fund expenditure. The powers of councils to establish reserves are laid out in Schedule 3 of the Local Government (Scotland) Act 1975. These allow councils to establish a Renewal and Repairs Fund, Insurance Fund and Capital Fund. Councils can also establish a Useable Capital Receipts Reserve. The Council must also maintain a General Fund and can earmark balances for specific purposes within the General Fund. 3.1.2 Unusable Reserves – Councils are also required to establish certain reserves that are not backed by resources. They are required purely for accounting purposes and do not represent resources available for councils to utilise. The Pensions Reserve, Revaluation Reserve, Capital Adjustment Account, Financial Instruments Adjustment Account and Accumulated Absences Account are examples of unusable reserves. 3.2 Reserve Balances at 31 March 2023 3.2.1 The balances on each type of reserve at 31 March 2023 are set out in the two tables below, per the Unaudited Accounts for 2022-23. Unusable Reserves £000 Revaluation Reserve 174,952 Capital Adjustment Account 268,788 Financial Instruments Adjustment Account (1,871) Pensions Reserve 232,073 Accumulated Absences Account (7,588) Total Unusable Reserves 666,354 Usable Reserves £000 Repairs and Renewals Fund 2,916 Capital Fund and Usable Capital Receipts Reserve 4,503 General Fund 86,409 Total Usable Reserves 93,828 Total Reserves 760,182 Page 119
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3.2.2 The Revaluation Reserve represents the unrealised gains in the valuation of fixed assets. The Capital Adjustment Account represents the difference between depreciation based on proper accounting practice and statutory charges for financing capital expenditure. The Financial Instruments Adjustment Account represents the difference between gains and losses on borrowing and statutory capital financing charges. The Pensions Reserve represents the difference between pension costs based on proper accounting practice and payments made for pension costs. The Accumulated Absences Account represents the costed difference between holiday pay entitlement and actual holidays taken at 31 March. 3.2.3 The Repairs and Renewals Fund was established to support funding of renewal and replacement of school equipment. Schools can only draw on the Repairs and Renewals Fund to the extent they have previously paid into the Fund and contributions must be contained within schools devolved budgets. 3.2.4 The Capital Fund was established to receive all capital receipts generated by the Council and can be used to support the capital plan or meet the principal repayments on loan charges. The Council decides as part of the budget process each year how it wishes to draw funding from the Capital Fund. 3.2.5 The Usable Capital Receipts Reserve relates to the accumulated unspent capital receipts from sale of council houses prior to transfer of the housing stock. The reserve forms part of the Council’s Strategic Housing Fund and can only be used for investment in social housing. The reserve will be used in accordance with the approach to investing in housing agreed by the Council in August 2012. 3.3 General Fund 3.3.1 The General Fund balance at 31 March 2023 can be analysed as follows: Balance 31/03/23 £000 Balance on General Fund as at 31 March 2022 96,081 Decrease to General Fund balance at end of 2022-23 (9,672) Earmarked Balances (79,466) Contingency allowance at 2% of net expenditure (5,691) Unallocated balance as at 31 March 2023 1,252 3.3.2 The General Fund includes balances that the Council has agreed to earmark for specific purposes. Some of these earmarked balances will be spent during the current financial year and some of them will be held over and spent in later years. The table below shows the balance at 31 March 2023, the new amount earmarked from the Loans Fund gain (see section 3.5.1), the amounts that are currently invested or set aside for major initiatives, the amount already spent and planned to be spent in the current year, the amount to be spent in future years and any sums no longer required to be earmarked. Appendix 1 provides further details on the breakdown of unspent budget earmarkings. Officers have Page 120
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reviewed and updated the spending profiles. Appendix 2 provides further details on the breakdown of COVID reserves. 3.4 Unallocated General Fund Balance 3.4.1 The Council’s General Fund contingency is set at 2% of net expenditure for 2023-24 and amounts to £5.691m. At the beginning of the financial year there was £1.252m of unallocated General Fund Balance (over and above contingency). After taking into consideration the budgeted allocation to the Earmarking Category Balance 31/03/2023 - per year end published report New Earmarkings in year Invested or committed for major initiatives /capital projects Drawn- down to 2023-24 Budget as at 31/10/23 Still to be drawn- down in 2023-24 Planned Spend Future Years Released to General Fund £000 £000 £000 £000 £000 £000 £000 Strategic Housing Fund 7,247 6,847 400 Investment in Affordable Housing 3,163 3,163 Capital Projects 16,059 4,776 20,835 Lochgilphead and Tarbert Regeneration 1,460 1,460 Support for Rural Growth Deal 756 756 Asset Management Investment 2,098 2,070 28 Piers and Harbours Investment Fund 2,789 2,789 Scottish Government Initiatives 2,834 352 1,486 996 CHORD 378 150 228 DMR Schools 1,394 625 736 33 Energy Efficiency Fund 218 218 Existing Legal Commitments 476 476 Unspent Grant 13,179 489 1,702 5,212 5,776 Unspent Third Party Contribution 265 30 138 97 Previous Council Decision - Other 3,808 1,699 225 1,424 460 Redundancy Provision 1,578 500 1,078 Supporting Organisational Change 1,426 87 113 1,226 One Council Property Team 566 189 377 Fleet - Timing Delay 658 658 Hermitage Park 19 19 Electric Vehicle Chargers 17 17 COVID-19 5,512 257 551 4,052 652 Unspent Budget 13,566 1,140 629 4,063 7,734 Totals 79,466 4,776 41,505 4,629 19,434 18,674 0 Page 121
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General Fund agreed by Council on 23 February 2023 of £0.019m, the current forecast outturn position for 2023-24 and the proposed allocation for floral displays the Council is forecast to have a £1.183m surplus over contingency. 3.4.2 The revenue budget position as at 31 October 2023 was estimated to be a £0.080m overspend. 3.4.3 Social Work, as a part of the Integrated Joint Board (IJB), are able to hold any surplus within reserves therefore it is expected that any underspend that materialises would be transferred to the IJB reserves and the General Fund of the Council would not be impacted. Note that as at 31 October, Social Work was projecting a breakeven position. 3.4.4 The Environment, Development and Infrastructure Committee on 31 August 2023 agreed to pursue a blended model of options for the provision of floral displays and recommended the additional revenue cost for 2023-24 of £0.008m be funded from the unallocated General Fund and built into the budget outlook estimates for future years. 3.4.5 The table below summarises the position of the unallocated General Fund balance taking into consideration the points noted above. Heading Detail £000 Unallocated General Fund as at 31 March 2023 This is the balance that is unallocated over and above the 2% contingency, which amounts to £5.691m 1,252 Budgeted allocation to General Fund for 2023-24 Budget Per the Budget Motion at Council on 23 February 2023 19 Current Forecast Outturn for 2023-24 as at 31 October 2023 Per paragraph 3.4.2. (80) Social Work outturn adjustment Per paragraph 3.4.3 - Social Work would expect to transfer any surplus to internal IJB reserves 0 Allocation from unallocated general fund balance Per paragraph 3.4.4 (8) Estimated Unallocated balance as at 31 March 2024 1,183 3.5 Loans Fund Review 3.5.1 At the Council meeting on 27 February 2020, it was agreed that the one-off re- profiling gain of £20.561m generated by the loans fund review should be used partly to create a provision for the increasing principal repayments over the next 10 years (£7.649m) with the remainder of the gain (£12.912m) used to fund known liabilities/cost pressures. The table below shows what has been drawn down against the one-off gain and the remaining balance. Page 122
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Agreed Allocation Transferred to Earmarked Reserves in previous years Transferred to Earmarked Reserves 23-24 Balance Remaining £000 £000 £000 £000 Provision for increasing principal repayments 7,649 7,649 Funding Gap in Capital Programme 2,619 (2,619) 0 Significant Strategic Change Projects 5,013 (2,856) (2,157) 0 Completed Projects 5,280 (5,280) 0 20,561 (8,136) (4,776) 7,649 4. CONCLUSION 4.1 The report outlines the overall reserves and balances for the Council covering the purpose and level of each reserve. It also provides detail as to expenditure against earmarked balances held within the General Fund. 4.2 As at 31 October 2023 the estimated unallocated General Fund, after taking into consideration the budget motion, the current forecast outturn for 2023-24 and the proposed allocation for floral displays, the Council is estimated to have a £1.183m surplus over contingency. 5. IMPLICATIONS 5.1 Policy - Earmarked funds and funds set aside for delivery of Single Outcome Agreement are available to support Council Policy. 5.2 Financial - Outlines the balances held with the Council’s usable and unusable reserves. 5.3 Legal - None. 5.4 HR - None. 5.5 Fairer Scotland Duty- None. 5.5.1 Equalities – protected characteristics - None. 5.5.2 Socio-economic Duty - None. 5.5.3 Islands - None. 5.6 Climate Change - None. 5.7 Risk - A contingency of £5.691m (equivalent to 2% of net expenditure) has been set aside as part of the general fund. This has been subject to a risk assessment. 5.8 Customer Service - None. Kirsty Flanagan Executive Director/Section 95 Officer 3 November 2023 Page 123
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Policy Lead for Finance and Commercial Services - Councillor Gary Mulvaney APPENDICES Appendix 1 – Earmarked Reserves breakdown of unspent budget Appendix 2 – Earmarked Reserves breakdown of COVID earmarkings For further information contact Anne Blue, Head of Financial Services anne.blue@argyll-bute.gov.uk Page 124
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APPENDIX 1 Earmarked Reserves - Unspent Budget As at 31 October 2023 Ref Department Service Description Opening Balance Budget Drawdown New earmarkings in year Remaining Balance Still to be drawndown in 23- 24 Planned to spend in future years Plans for Use Amount Planned to be Spent in 2023- 24 Amount Planned to be Spent in 2024- 25 Amount Planned to be Spent from 2025/26 onwards 001 Chief Executive's Unit Community Planning Communities and Partnership Team 8,855 0 8,855 0 8,855 The funds have originated from externally sourced income due to an employee being seconded to the Scottish Community Development Centre (SCDC). The funds will be used to support the team in relation to meeting its priorities of Building Back Better (Communities), Climate Change and the review of the Argyll and Bute Outcome Improvement Plan. 0 8,855 002 Executive Director (Douglas Hendry) Across Services / Education Digital Projects (Supply Staff Booking System) 25,100 9,900 15,200 0 15,200 To deliver a number of Digital Service Transformation Projects with a commitment of £0.035m towards a Supply Staff Booking system. Phase 1 of the project is nearing completion. 9,900 15,200 003 Executive Director (Douglas Hendry) Commercial Services Rothesay Academy - Demolition and Waste Disposal 953,875 53,495 900,380 0 900,380 Since Rothesay Academy was vacated over 15 years ago no site clearance has taken place and there are potential Health and Safety and insurance cover implications due to deterioration of the building. £55,000 earmarking will allow clearance of remaining materials and debris. Also £840,000 to fund estimated future costs of demolition (subject to removal of listed status) to be added to an existing earmarking . There are potential Health and Safety and insurance cover implications due to deterioration of the building. 53,495 900,380 0 004 Executive Director (Douglas Hendry) Commercial Services Rothesay Pavilion Charity 750,000 0 750,000 0 750,000 Agreed at Council meeting February 2020, £750k additional revenue support subject to conditions which seek to minimise the risk to the Council as far as is reasonably practicable including requirement for adequate business and financial management and regular reporting by RPC. 0 750,000 005 Executive Director (Douglas Hendry) Commercial Services Rothesay Pavilion Essential repairs 306,400 0 306,400 0 306,400 Essential repairs to deal with potential health and safety risks and to avoid further deterioration. Budget provision was approved by the Policy and Resources Committee on 21 August 2014. 0 306,400 006 Executive Director (Douglas Hendry) Commercial Services Estates - NDR Revaluation Appeals 84,688 24,750 59,938 59,938 0 The Council agreed to make provision to meet the cost of appealing Non Domestic Rates (NDR) revaluations which were imposed from April 2017. The remaining funds were carried forward to the 2023/24 revaluation cycle however a recent change in position by the Scottish Government may restrict the appeals which can be made. This is still under discussion and Gerald Eve Surveyors have been appointed as specialist advisers on this matter. In the event that appeals are limited there may be an opportunity to utilise Gerald Eve for more general valuation advice subject to Procurement approval. 84,688 0 007 Executive Director (Douglas Hendry) Commercial Services Demolition of former Lochgilphead Primary and Rothesay Secondary School 0 0 0 0 0 To fund the demolition of the former Lochgilphead Primary School and former Rothesay Academy (subject to the removal of the listing). Lochgilphead Primary complete and remainder of funds to be used to commence Rothesay Project. 0 0 008 Executive Director (Douglas Hendry) Commercial Services Mid Argyll Community Pool 30,000 0 30,000 30,000 0 At the Council Budget meeting on 23 February 2023, the Council committed to a one-off investment of £0.030m to Mid Argyll Community Pool in response to an external funding request 30,000 0 009 Executive Director (Douglas Hendry) Commercial Services MacTaggart Leisure Islay 30,000 0 30,000 30,000 0 At the Council Budget meeting on 23 February 2023, the Council committed to a one-off investment of £0.030m to MacTaggart Leisure, Islay in response to an external funding request 30,000 0 010 Executive Director (Douglas Hendry) Commercial Services Site Investigation Works 21,013 0 21,013 21,013 0 For Site Investigation works in relation to Tweeddale Street Car Park and Oban Airport Business Park, exploring commercial opportunities to develop the sites and raise revenue income for Argyll and Bute Council. HUB North were instructed to procure contractors to undertake the site investigations these are now complete. The remainder of the budget is intended to be utilised for other site investigation and pre-development works to further develop commercial opportunities across the council area. 21,013 0 011 Non Departmental / Executive Director (Douglas Hendry) Across Services / Commercial Services Information Management (Estates Survey Work) 12,697 0 12,697 12,697 0 To support a number of initiatives in respect of improving the Council's information management in line with the transformation agenda and increasing the pace of change as outlined in the BV Review. The planned initiatives include: Estates Survey work £122k, Digitalisation of Title Deeds £92k, document management and workflow system for Planning, Building Standards and Environmental Health £77k and a balance of funding to explore information management solutions in a strategic and coherent way £209k 12,697 0 012 Executive Director (Douglas Hendry) Commercial Services (2023 Contract Inflation Adjustments) MAKI/Islay Pools SLA - inflationary increase 9,523 0 9,523 9,523 0 Additional pressure resulting from the February 2023 inflation rate being higher than the assumptions built into the non-pay inflation calculation which went to Council at budget setting and reflects the difference between what was in the budget and what will need to be paid under the SLAs. The February inflation figure wasn't known until the middle of March, after the budget was set, and the recent trend in inflation reductions turned around in February with an increase. 9,523 0 0 013 Executive Director (Douglas Hendry) Education ASN Review 1,255,000 0 1,255,000 0 1,255,000 To fund capital costs of ASN adaptations as part of ASN Review to increase equity of provision across Argyll and Bute. This will be subject to a business case as part of the wider ASN review. 0 1,255,000 0 014 Executive Director (Douglas Hendry) Education Reduced Teacher Staffing Costs - Strike Action 800,000 0 800,000 0 800,000 To fund one off savings in 2024-25 from the underspend in staffing from strike action. 0 800,000 0 015 Executive Director (Douglas Hendry) Education (2023 Digital Projects) School WiFi Upgrades 200,000 22,925 177,075 127,075 50,000 To extend WiFi coverage within school settings through the purchase of additional hardware such as access points, switches and other networking hardware. This will result in more flexible learning spaces and support the growing number of devices within schools. 150,000 50,000 0 016 Executive Director (Douglas Hendry) Education Education Transformation Fund 146,579 1,942 144,637 144,637 0 At the Council meeting on 27 February 2020, it was agreed to input £400k into Education Digital Learning. The additional funds have been spent in 20/21, 21/22 and 22/23 as part of the ongoing transformation work in the Education service, focussing on digital and virtual learning technology and the development of learning clusters. This will continue into 2023/24. 146,579 0 Page 125
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Ref Department Service Description Opening Balance Budget Drawdown New earmarkings in year Remaining Balance Still to be drawndown in 23- 24 Planned to spend in future years Plans for Use Amount Planned to be Spent in 2023- 24 Amount Planned to be Spent in 2024- 25 Amount Planned to be Spent from 2025/26 onwards 017 Executive Director (Douglas Hendry) Education MCR Pathways Pilot 80,000 40,872 39,128 0 39,128 Funding to support implementation of MCR Pathways mentoring programme within three secondary schools for 2023-24 academic year. Funding will allow the employment of a dedicated Co-ordinator within each setting to develop and implement the programme which is designed to benefit care experienced and other disadvantaged pupils through targeted mentoring support. 40,872 39,128 0 018 Executive Director (Douglas Hendry) Education Gaelic Specific Grant 30,000 0 30,000 30,000 0 Proposal to fund the continuation of the Principal Teacher Languages (Gaelic focus) post for the 2023- 24 academic year to promote and develop Gaelic Medium Education across Argyll and Bute. This earmarking refers to the Council contribution towards the Gaelic grant for 22-23. 30,000 0 0 019 Executive Director (Douglas Hendry) Education (2023 Digital Projects) Cashless Catering 30,000 0 30,000 5,000 25,000 To support the ongoing implementation of the new cashless catering system during the testing and roll out phase. 5,000 25,000 0 020 Executive Director (Douglas Hendry) Education Skype for Business for Education / Digital Projects (Skype for Business) 10,000 0 10,000 10,000 0 To fund the initial capital costs for the implementation of Skype for Business for Education. This will bring the Education service in line with other council departments and will improve staff collaboration and modernise school telephony to deliver the service more efficiently and cost effectively. A balance was released back to the general fund in 2021-22 because the rollout project was almost complete with only £0.01m expected spend in 23/24. 10,000 0 021 Executive Director (Douglas Hendry) Education Education Learning Estate Condition Surveys 1,815 0 1,815 1,815 0 To fund the delivery of School Core Facts (SCF) compliant Condition Surveys for prioritised School Buildings. 1,815 0 022 Executive Director (Douglas Hendry) Legal and Regulatory Services Education Purchasing Officers 210,000 37,000 173,000 68,000 105,000 The earmarked funds will be used to fund an education purchasing team within the Procurement Service for two years. The team will embed good procurement practice, train headteachers on current procurement process requirements, develop spend plans that evidence best value. 105,000 105,000 023 Non Departmental / Executive Director (Douglas Hendry) Across Services / Legal and Regulatory Services Information Management (Digitalisation of Title Deeds) 92,000 0 92,000 92,000 0 To support a number of initiatives in respect of improving the Council's information management in line with the transformation agenda and increasing the pace of change as outlined in the BV Review. The planned initiatives include: Estates Survey work £122k, Digitalisation of Title Deeds £92k (delay on spending due to COVID-19), document management and workflow system for Planning, Building Standards and Environmental Health £77k and a balance of funding to explore information management solutions in a strategic and coherent way £209k 92,000 0 024 Executive Director (Douglas Hendry) Legal and Regulatory Services Councillor IT Equipment 44,557 0 44,557 29,557 15,000 There is currently no budget for the provision and renewal of IT equipment for members. the earmarking identifies a resource to utilise spend for that purpose to ensure that members have continued support in maintaining and replacing vital IT equipment. 29,557 15,000 025 Executive Director (Douglas Hendry) Legal and Regulatory Services Digital Projects: Hybrid Council meetings 43,302 0 43,302 43,302 0 The funding will be used to maintain the ICT equipment used to support the provision of on-line and hybrid Council meetings. 43,302 0 026 Executive Director (Douglas Hendry) Legal and Regulatory Services Debt Counselling & Welfare Rights 21,452 0 21,452 5,965 15,487 To meet the cost of a Debt Counselling and Welfare Rights Management System. 5,965 15,487 027 Executive Director (Douglas Hendry) Legal and Regulatory Support (2023 Contract Inflation Adjustments) NPDO and DBFM School Contracts – inflationary increase 350,000 350,000 0 0 0 Additional pressure resulting from the February 2023 inflation rate being higher than the assumptions built into the non-pay inflation calculation which went to Council at budget setting and reflects the difference between what was in the budget and what will need to be paid under the NPDO/Hub DBFM Schools contracts. The February inflation figure wasn't known until the middle of March, after the budget was set, and the recent trend in inflation reductions turned around in February with an increase. 350,000 0 0 028 Executive Director (Douglas Hendry) Legal and Regulatory Support (2023 Digital Projects) Replacement of Council Chambers Online Meeting Equipment 130,000 0 130,000 130,000 0 Current online meeting system is less than resilient and has failed on a number of occasions, leading to issues at strategic committees. A condition assessment by the incumbent maintenance contractor has highlighted that the current equipment is now at end of life and unsupportable due to the obsolescence of the system. Discussions with ICT have taken place to identify a simpler more robust solution to be procured. 130,000 0 0 029 Executive Director (Kirsty Flanagan) Customer Support Services (2023 Digital Projects) iTrent Project 332,000 0 332,000 147,000 185,000 Combination of parallel running of the new iTrent system alongside the legacy systems for up to 18 months whilst iTrent is implemented and additional staffing resource to implement iTrent in late June 2024 and support staff for the first 3 months of operation through summer 2024. Total includes £73k from Financial services for funding additional staffing resource to implement the payroll components of the iTrent HR and Payroll System by the end of June 2024 and support staff for the first 3 months of operation during summer 2024. 147,000 185,000 0 030 Executive Director (Kirsty Flanagan) Customer Support Services Security Operations Centre Subscription 113,594 0 113,594 53,594 60,000 There is a requirement to pay for a 3-year subscription at £60,000 per annum with a cost pressure being added to the ICT revenue budget to cover the costs from year 4 onwards. There is unallocated funding of £103,545 from the earmarking (172) created at 2020/21 year end for 'Digital Projects' combined with this earmarking to cover these costs for 3 years. 53,594 60,000 031 Executive Director (Kirsty Flanagan) Customer Support Services Growing our Own and Modern Apprentices 109,150 0 109,150 95,790 13,360 Funding earmarked to support trainee development and modern apprenticeship opportunities based on priority workforce risk areas. These areas have been identified and proposals developed. £95,790 to be spent in 23/24 and £13,360 to be spent in 24/25 to fund a graduate trainee and 3 apprentices to deliver trainee development and modern apprenticeship opportunities 95,790 13,360 032 Non Departmental / Executive Director (Kirsty Flanagan) Across Services / Customer Support Services Digital Projects (Increase in Schools Bandwidth) 63,455 0 63,455 63,455 0 To complete one of a number of Digital Service Transformation projects with a commitment of £0.064m to increase Schools Bandwidth. 63,455 0 033 Executive Director (Kirsty Flanagan) Customer Support Services (2023 Digital Projects) Resilient Website Project 60,000 0 60,000 60,000 0 Cybersecurity action to move to a cloud based website platform that would improve resilience and enable service continuity in the event of a cyber attack. Procurement in progress for resilient website solution and Scotgov Cloud Services Project providing input. Contract Award expected by end 2023. 60,000 0 0 034 Executive Director (Kirsty Flanagan) Customer Support Services (2023 Digital Projects) Digital Project Officer 60,000 0 60,000 60,000 0 Employ a temporary Digital Project Officer as part of OD changes. 60,000 0 0 Page 126
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Ref Department Service Description Opening Balance Budget Drawdown New earmarkings in year Remaining Balance Still to be drawndown in 23- 24 Planned to spend in future years Plans for Use Amount Planned to be Spent in 2023- 24 Amount Planned to be Spent in 2024- 25 Amount Planned to be Spent from 2025/26 onwards 035 Executive Director (Kirsty Flanagan) Customer Support Services Implementation of Gaelic Language Plan 30,000 0 30,000 30,000 0 Agreed at Council Meeting February 2021. Provision of funding for delivery and implementation of the council’s Gaelic Language Plan in recognition of the contribution that Gaelic makes to economic growth and to the tourism sector, and to enable delivery of key activities within the plan which currently receive no revenue funding. 30,000 0 036 Executive Director (Kirsty Flanagan) Customer Support Services (2023 Digital Projects) Digital Engagement Services Developer 28,000 0 28,000 11,630 16,370 To fund 50% of a new temporary LGE10 post. The post is a Digital Engagement Services Developer that will be provide capacity to deliver service efficiencies through the use of the new CREATE/RPA software. The other 50% of the post can be funded from a current vacancy. New temporary Digital Developer took up post on 18/09 and funds will be used for salary across the rest of the year – to be drawn down in FQ4. 11,630 16,370 0 037 Executive Director (Kirsty Flanagan) Customer Support Services Business Development Training 27,601 288 27,313 27,313 0 This budget is funding ongoing leadership development, coaching, action learning sets and commissioned training including Priority Management. 27,601 0 038 Executive Director (Kirsty Flanagan) Customer Support Services Learning and Development 19,436 0 19,436 19,436 0 In order to maximise the opportunities and efficiencies of digital learning, this funding will be used to support the extension of digital learning in order to deliver the Digital Learning Strategy, which was approved in FQ4 20/21. 19,436 0 039 Executive Director (Kirsty Flanagan) Customer Support Services Establishing HR Service Centre 13,824 0 13,824 13,824 0 To facilitate the implementation of technical efficiency improvements and new processes 13,824 0 040 Non Departmental / Executive Director (Kirsty Flanagan) Across Services / Customer Support Services Digital Projects (Replacement Learning Management System) 11,470 0 11,470 11,470 0 To deliver a number of Digital Service Transformation Projects with an original commitment of £0.030m towards a replacement Learning Management System £0.030m. 11,470 0 041 Executive Director (Kirsty Flanagan) Development & Economic Growth Planning Income (Saving 23-24) 340,000 0 340,000 340,000 0 To fund one off operational saving MGT5 agreed for the 2023/24 budget 340,000 0 0 042 Executive Director (Kirsty Flanagan) Development & Economic Growth Planning Income 60,000 0 60,000 60,000 0 To fund additional resources to support and develop the Council's planning service. 60,000 0 0 043 Executive Director (Kirsty Flanagan) Development and Economic Growth Oban TIF (Tax Incremental Financing) 385,193 0 385,193 116,000 269,193 Will be used to fund the TIF Programme office for a further 3 years as well as the programme office for Rural Growth Deal beyond the funding that was agreed at Council for this in February 2021. 116,000 269,193 044 Executive Director (Kirsty Flanagan) Development and Economic Growth Strategic Events & Festivals 80,664 0 80,664 40,946 39,718 At the Council meeting on 25 February 21, a decision was taken to agree £90k funding for Events and Festivals for 22/23, in order that the application process can commence during 21/22 and that this agreed figure be augmented by any underspend remaining from the 20/21 financial year. At 24 February 22, decision made to agree £90k for 23/24, in order that the application process can commence during 22/23 and that this agreed figure be augmented by any underspend remaining from the 21/22 financial year. Applications have been received and payments will be made in 2023-2024. 40,946 39,718 045 Executive Director (Kirsty Flanagan) Development and Economic Growth Island Post 50,461 0 50,461 50,461 0 To fund a temporary post at LGE11 to assist with the National Islands Plan Implementation Route Map 2020-2025. 50,461 0 046 Non Departmental / Executive Director (Kirsty Flanagan) Across Services / Development and Economic Growth Information Management (Document Management and Workflow for Planning, Building Standards and Environmental Health) 21,177 0 21,177 21,177 0 To support a number of initiatives in respect of improving the Council's information management in line with the transformation agenda and increasing the pace of change as outlined in the BV Review. The planned initiatives include: Estates Survey work £122k, Digitalisation of Title Deeds £92k, document management and workflow system for Planning, Building Standards and Environmental Health £77k and a balance of funding to explore information management solutions in a strategic and coherent way £209k Hoping to implement the replacement for IDOX in March 2024 but there have been severe issues/delays with the new programme 21,177 0 047 Executive Director (Kirsty Flanagan) Development and Economic Growth Royal National Mod 20,000 0 20,000 20,000 0 One off funding allocation for the Royal National Mod agreed as part of the budget setting process for 2019/20. Grant contract issued. Proposed payment of £20k per annum starting 2020/21 (2023/24 final payment of £20k) 20,000 0 048 Executive Director (Kirsty Flanagan) Financial Services Financial Systems 33,748 0 33,748 33,748 0 To fund the completion of the implementation of the Oracle Fusion Financial Management System, a software update for cash receipting to ensure card payments can still be taken and the procurement and implementation of a new system to manage the requirements of the IFRS16 Leases accounting standard. 33,748 0 049 Executive Director (Kirsty Flanagan) Financial Services Accounting and Budgeting Team Resilience 30,664 0 30,664 16,664 14,000 To fund the implementation of a new staffing structure in 2022/23 as agreed at ELT on 12 April 2022 which has been implemented. The residual funding is being used to meet the costs of ongoing professional accountancy training over the period 2022/23 to 2026/27 16,664 14,000 050 Executive Director (Kirsty Flanagan) Financial Services CIPFA 24,040 1,835 22,205 4,165 18,040 CIPFA Training - To fund the professional training costs for staff undertaking the CIPFA professional accountancy qualification. 6,000 18,040 051 Executive Director (Kirsty Flanagan) Roads & Infrastructure Waste Variation Monies 1,967,056 0 1,967,056 724,884 1,242,172 This will be used to fund/part-fund various waste infrastructure projects that will support the council’s compliance with the 2025 ban on the Landfill of Biodegradable Municipal Waste. This will include scoping work for the creation of a waste transfer station at Helensburgh and landfill cell construction works at Gartbreck (£640k for Capital works on Gartbreck completed in 2022/23, reserve will be drawn down for this in 2023/24). 724,884 410,000 832,172 052 Executive Director (Kirsty Flanagan) Roads & Infrastructure 3G pitches / Tarbert Sports Pitches 375,022 76,749 298,273 3,251 295,022 In November 2018, the Council agreed to a maintenance funding package to be progressed for a number of 3G pitches including Tarbert. This funding will provide an estimated 6.5 years’ worth of ongoing maintenance up to 2025-26. 80,000 80,000 215,022 053 Executive Director (Kirsty Flanagan) Roads & Infrastructure Green Transport Initiatives 140,000 0 140,000 140,000 0 At the Council meeting on 27 February 2020, it was agreed to input £400k in Green transport, investment in footway and cycle path maintenance supporting the healthy wellbeing and green agenda. Spend has been delayed due to COVID and this will be taken forward in 23/24. £260k Footways Reconstruction programme now spent and will be drawn down against capital programme during 23/24. £140k Ardrishaig North Project will be spent in 22/23 and drawn down in 23/24. 140,000 0 054 Executive Director (Kirsty Flanagan) Roads & Infrastructure Climate Change 81,884 0 81,884 81,884 0 At the Council meeting on 27 February 2020, it was agreed to input £500k budget to mitigate the impacts of weather related damage and climate change with specific emphasis on gully cleaning and drainage improvements. Spend has been delayed due to COVID and the intention is to spend the funds on 2 Gully Motors plus staff over next 2 years. Vehicles have been received and budget will be drawn down to cover their cost. The remaining budget will be used towards running the vehicles. 81,884 0 Page 127
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Ref Department Service Description Opening Balance Budget Drawdown New earmarkings in year Remaining Balance Still to be drawndown in 23- 24 Planned to spend in future years Plans for Use Amount Planned to be Spent in 2023- 24 Amount Planned to be Spent in 2024- 25 Amount Planned to be Spent from 2025/26 onwards 055 Executive Director (Kirsty Flanagan) Roads & Infrastructure Amenity Services introduction of management information system 28,099 0 28,099 0 28,099 Delay with introduction of amenity time recording system due to increased costs. Discussions ongoing to find alternative cheaper solution. The software/system being introduced by HR/Payroll during 2023- 24 offers a time-recording facility. Although not included in the current HR/Payroll spec, once the new system is up and running, the proposal would be to investigate the time-recording system to see if viable for amenity time recording purposes. 0 28,099 056 Executive Director (Kirsty Flanagan) Roads & Infrastructure Services (2023 Contract Inflation Adjustments) Waste PPP 255,000 0 255,000 150,000 105,000 Adjustment to inflation included in the budget based on updated RPIX figures at February 2023. Based on the current forecast it is anticipated the full earmarking will not be required and is unlikely to exceed £150K. For the purposes of balancing this spreadsheet I have entered £150K against 2023-24 and the balance against 2024-25 at this stage. Will be monitored monthly. 150,000 105,000 0 057 Non Departmental Non Departmental Underwriting development of Rothesay Pavilion 1,000,000 0 1,000,000 0 1,000,000 Funding to meet additional costs identified as necessary for the refurbishment of Rothesay Pavilion. 0 1,000,000 058 Non Departmental Non Departmental Oban TIF (Tax Incremental Financing - Excess NDR) 875,651 0 875,651 0 875,651 This is the surplus NDR after paying all Loans Charges in respect of TIF infrastructure projects. This fund will be used in the future as TIF projects are delivered. 0 0 875,651 059 Non Departmental Non Departmental Loans Fund 385,279 0 385,279 385,279 0 At the Council Budget meeting on 24 February 2022, Saving FS01, a Loans Fund Management/Operational saving for 22/23 budget of £0.500m was agreed with at least £0.200m to come from underspends in 21/22. The underspend position for 21/22 is £0.385m and this earmarking is being released as a saving to help bridge the 2023/24 budget gap. 385,279 0 060 Non Departmental Non Departmental Loans Fund 300,000 0 300,000 300,000 0 To fund one off operational saving MGT3 agreed for the 2023/24 budget 300,000 0 0 061 Non Departmental Non Departmental Information Management (Balance of Funding) 209,844 9,375 200,469 -9,375 209,844 To support a number of initiatives in respect of improving the Council's information management in line with the transformation agenda and increasing the pace of change as outlined in the BV Review. The planned initiatives include: Estates Survey work £122k, Digitalisation of Title Deeds £92k, document management and workflow system for Planning, Building Standards and Environmental Health £77k and a balance of funding to explore information management solutions in a strategic and coherent way £209k 0 209,844 062 Non Departmental Non Departmental Spend to Save Route Optimisation Software 100,000 0 100,000 100,000 0 One-off re-profiling gain as a result of the loans fund review to fund known liabilities/cost pressures as agreed at budget setting meeting in February 2020 - Spend to save route optimisation (£0.100m) which will be spent over 2023/24. 100,000 0 063 Non Departmental / Social Work Non Departmental Engagement with Hub North re provision of services for older adults and vulnerable people across Argyll and Bute 100,000 0 100,000 100,000 0 At the Council budget meeting February 23, an allocation of £0.1m from the Unallocated General Fund balance for the Health and Social Care Partnership to engage, in partnership with the Council, with Hub North to develop a strategic business case in relation to the provision of services for older adults and other vulnerable people across Argyll and Bute. 100,000 0 064 Non Departmental Non Departmental CHARTS 80,000 0 80,000 80,000 0 As agreed at Council on 24 February 2022, investment in CHARTS £0.075m. To support the organisation in delivering targeted support, in communities, to the culture, arts and heritage sector as part of its plans to contribute to overall economic recovery. At the Council Budget meeting on 23 February 2023, the Council committed to £0.075m one-off investment in CHARTS in response to an external funding request will be spent in 23-24 80,000 065 Non Departmental Non Departmental Community Resilience Fund 76,447 0 76,447 0 76,447 Fund established in 2012/13 to be spent over more than one year. Fund reduced at the Council meeting on 11 February 2016 0 76,447 13,565,615 629,131 0 12,936,484 4,203,118 8,733,366 4,832,249 6,810,521 1,922,845 Page 128
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APPENDIX 2 COVID As at 31 October 2023 Ref Department Service Description Opening Balance Budget Drawdown Released back to General Fund New earmarkings in year Remaining Balance Still to be drawndown in 23- 24 Planned to spend in future years Plans for Use Amount Planned to be Spent in 2023- 24 Amount Planned to be Spent in 2024- 25 Amount Planned to be Spent from 2025/26 onwards 001 Chief Executive's Unit Community Planning Community Planning - temp post to support communities 55,000 0 55,000 55,000 0 Post supporting year 1 of supporting communities fund 55,000 0 002 Chief Executive's Unit Community Planning Covid impacts – support to communities’ 49,147 27,926 21,221 21,221 0 Funding provided in relation to the Local Self-Isolation Assistance Service. The Community Planning and Development Team will work with community groups to support their community response and resiliency to Test and Protect and the longer term impacts of COVID-19 on local community organisations. 49,147 0 003 Executive Director (Douglas Hendry) Education Logistics Funding - Safe Opening of Schools 699,036 0 699,036 699,036 0 Scottish Government funding to ensure the safe opening and operation of schools. Includes transport, PPE, cleaning, ventilation and expansion of estate. It is likely that any unused balances would have to be returned to the Scottish Government. 699,036 0 004 Executive Director (Douglas Hendry) Education Additional Teaching/Support in Schools/Digital Devices/Family Home Learning Support Fund - 421,198 69,832 351,366 311,366 40,000 Continuation of funding for additional staffing, teachers, support staff, additional devices for pupils and additional family/home learning programmes. 381,198 40,000 005 Executive Director (Douglas Hendry) Education Education to Support Young People 191,042 160,560 30,482 0 30,482 As agreed at the Council Meeting on 25 February 2021 with an original allocation of £0.600m. Agreed to fund a package of measures to boost the wellbeing and build back the resilience of young people, in particular those most vulnerable, following the Covid-19 pandemic, including counselling and increased provision of childcare for children under three. Notes that the Scottish Government is yet to confirm details of funding for similar initiatives and, should our investment in children’s wellbeing qualify for this funding, the balance will be re-allocated to the Recovery and Renewal Fund. 160,560 30,482 006 Executive Director (Douglas Hendry) Education Recruitment of Additional Teachers and Support Staff in Schools 51,371 51,371 0 0 0 Fund additional teachers and support staff. 51,371 0 007 Executive Director (Douglas Hendry) Legal and Regulatory Services Welfare Rights Support 131,634 64,906 66,728 15,278 51,450 As agreed at the Council Meeting on 25 February 2021 - an allocation of £0.172m. As part of our focus on Improving Opportunities for People and Communities, agrees to provide additional resources to proactively support people experiencing poverty and hardship, by investing in two additional Welfare Rights support staff for two years. 80,184 51,450 008 Executive Director (Kirsty Flanagan) Customer Support Services Self Isolated Support / Self Isolated Support Grant (HR) 65,250 0 65,250 49,000 16,250 These were monies that were provided by Scotgov to fund additional overtime and resources for Shielding/Caring for People and Test and Protect activities. The funds are being used for a number of Customer Service and Business efficiency related projects including a system and consultancy of RPA (robotic process automation) and application development. A 49,000 16,250 009 Executive Director (Kirsty Flanagan) Development and Economic Growth Staycation and Marketing Argyll and Bute 389,992 0 389,992 300,000 89,992 As agreed at the Council Meeting on 25 February 2021 with an original allocation of £0.800m. This will include provision of additional waste disposal facilities and other facilities that will be informed by the Motorhome and Informal Camping Survey. 300,000 89,992 010 Executive Director (Kirsty Flanagan) Development and Economic Growth Tackling Digital Exclusion Top-Up Fund 217,600 0 217,600 217,600 0 As agreed at the Council Meeting on 25 February 2021. Establishes the Tackling Digital Exclusion Top Up Fund to support communities and in some cases individuals that are missing out on national programmes due to logistics and economies of scale. While vouchers are available from the UK and Scottish Governments in some cases these do not cover the full cost of infrastructure builds. Expenditure should be incurred during 23-24 to draw down against. 217,600 0 011 Executive Director (Kirsty Flanagan) Development and Economic Growth LACER Funding (Sector Support Grant) 95,398 0 95,398 95,398 0 Local Authority COVID Economic Recovery Fund grant. This will provide funding, either part of the small business development grant or standalone, to help micros and small business to implement projects that 95,398 0 012 Executive Director (Kirsty Flanagan) Development and Economic Growth Economic Development - temp post to support economic recovery 55,000 0 55,000 55,000 0 As agreed at Policy & Resources committee on 9 December 2021, allocation of £0.055m to a post to support the economic and social recovery together with the building back stronger themes. To be used to fund Settlement Project Support Officer during 23-24. 55,000 0 013 Executive Director (Kirsty Flanagan) Development and Economic Growth EH Covid Posts 37,775 0 37,775 37,775 0 Funding initially for 2 posts for 2 years. Posts were initially recruited to with one leaving and the other going on maternity leave resulting in delays in expenditure. One employee is now back from maternity leave and earmarked reserve will be drawn down to cover their costs in 23-24. 37,775 0 014 Executive Director (Kirsty Flanagan) Development and Economic Growth LACER Funding (New Enterprise Support Grant) 31,159 0 31,159 31,159 0 Local Authority COVID Economic Recovery Fund grant. This funding would provide £3,000 grants to help new businesses start up and establish. Fund fully committed, there was a delay in getting all payments made and remainder will be made in 23-24. 31,159 0 015 Executive Director (Kirsty Flanagan) Development and Economic Growth LACER Funding (Shop Local) 26,793 0 26,793 26,793 0 Local Authority COVID Economic Recovery Fund grant. This funding would provide funding to continue the Shop Local scheme into 2022/23 and 2023/24, buying additional cards and allow the cards to gather 26,793 0 016 Executive Director (Kirsty Flanagan) Development and Economic Growth LACER Funding (Small Business Development Grant) 24,988 0 24,988 24,988 0 Local Authority COVID Economic Recovery Fund grant. This funding will provide funding of between £500 and £5,000 to help existing micro and small businesses to improve their resilience or growth via projects to implement green initiatives, implement digital development, implement marketing 24,988 0 017 Executive Director (Kirsty Flanagan) Financial Services Housing Benefits Private 321,524 35,640 285,884 285,884 0 Specific funding allocation for Housing Benefit including DHP. Funds will be used to continue to support vulnerable people initially financially affected by the COVID-19 outbreak but now facing the cost of living crisis to sustain their tenancies. This earmarking will help offset potential overspends in the DHP/ Scottish Welfare Fund budget going forward. 321,524 0 018 Executive Director (Kirsty Flanagan) Financial Services Flexible Food Fund 194,156 137,445 56,711 56,711 0 Financial Insecurity funding from Scottish Government routed into the Argyll and Bute Flexible Food and Fuel Fund (ABFFFF) is aimed at tackling financial insecurity for adults and families across Argyll and Bute. Working in partnership with the Community Food Forum, Bute Advice Centre and ALIenergy, households 194,156 0 Page 129
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Ref Department Service Description Opening Balance Budget Drawdown Released back to General Fund New earmarkings in year Remaining Balance Still to be drawndown in 23- 24 Planned to spend in future years Plans for Use Amount Planned to be Spent in 2023- 24 Amount Planned to be Spent in 2024- 25 Amount Planned to be Spent from 2025/26 onwards 019 Executive Director (Kirsty Flanagan) Financial Services Flexible Funding for Supporting People while at Tier 4 COVID 76,357 3,069 73,288 73,288 0 Funding from SG to strengthen local authority responses to meet emerging needs and support people in their communities struggling with the restrictions and guidance at all protection levels re COVID, particularly those at risk through health and social inequalities. This support could cover the same types of support. In June 2021 the Council agreed to support 20 projects led by a range of Council officers, officers from the HSCP and members of the third sector to deliver wide ranging support across our region. A report will be presented to members in due course. 76,357 0 020 Executive Director (Kirsty Flanagan) Financial Services Self Isolated Support Grant 5,316 0 5,316 0 5,316 Unspent admin funding for processing Self isolation Support Grants. 0 5,316 021 Non Departmental Non Departmental Recovery and Renewal Fund 1,547,000 0 1,547,000 1,547,000 0 As agreed at Council on 24 February 2022, Recovery and Renewal Fund £1.547m. This is provision for future recovery, regeneration and renewal, as well as any future pressures which may arise following the Covid-19 pandemic through a dedicated Recovery and Renewal Fund. Commitments have been made against this fund as follows: Levelling up bid costs £0.150m, Scotland Loves Local overspend £0.037m and Rothesay Pavilion £1.360m. 1,547,000 0 022 Non Departmental Non Departmental COVID Funding 418,337 0 418,337 0 418,337 Net balance on COVID cost centres at year end 2022/23 with proposals on use to be developed. 0 0 418,337 023 Non Departmental Non Departmental Capital pressure 257,000 0 257,000 257,000 0 Pressure identified on the 20/21 COSLA COVID costs spreadsheets - requires to be earmarked to be drawn down when required against the Capital Plan 257,000 0 024 Non Departmental Non Departmental Levelling up Fund bids per P&R February 22 150,000 0 150,000 150,000 0 As agreed at Policy & Resources committee on 17 February 2022, an allocation of up to £0.150m to support Levelling Up Fund bids 150,000 0 0 0 0 0 0 5,512,073 550,749 0 0 4,961,324 4,309,497 651,827 4,860,246 233,490 418,337 Page 130
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ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE FINANCIAL SERVICES 7 DECEMBER 2023 BUDGET OUTLOOK 2024-25 TO 2028-29 1. EXECUTIVE SUMMARY 1.1 This report provides an update to the budget outlook covering the period 2024- 25 to 2028-29, reported to the Policy and Resources Committee on 12 October 2023. 1.2 The estimates within the report are based on the mid-range scenario with best and worst case scenarios noted in Appendix 1. 1.3 The assumptions in respect of future years Scottish Government funding remain unchanged from those reported on 10 August 2023 and range between 0.5% increase (best case) and 0.5% reduction (worst case) with a mid-range of 0%. This assumption is based on the settlement over the last few years and the estimates within the spending review which indicate that a flat cash settlement in future years may be the most likely position, however this assumption will be kept under review and updated as necessary during 2023-24. 1.4 There are no changes to my previous assumptions around the growth in Council Tax. The Council tax base has been assumed to grow by 0.25% in the worst case scenario, 0.5% in the mid-range scenario and 0.75% in the best case. 1.5 There have been three changes to the base budget since the report on 13 October 2023: As detailed at paragraph 4.1.2 the cost of the teacher’s pay award was £2.472m of which £0.080m will be funded from the £1.4m contingency set aside as part of the budget setting process. Both of these values have been adjusted for within the base budget. As part of the Council Tax Business Process Review £0.024m to fund posts associated with the work from the review is required to be built into the base and will be funded through the additional council tax generated. Confirmation has been received regarding the level of specific grant funding for ferries for 2023-24 and it is higher than budgeted and includes funding for items that we had previously funded in-house. It is assumed that the grant will continue at least at the same level into 2024- 25 and therefore there is a surplus of £0.191m that can be removed from the base budget. 1.6 Assumptions in respect of employee costs for Council services are as follows: Page 131 Agenda Item 5
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The SJC and Chief Officers pay award for 2023-24 has progressed further but has yet to be finalised and this may have an impact on the base budget if the pay award is greater than the total of what has been allowed for the in the budget and what Scottish Government are committing towards the pay deal. It is hoped that this will be finalised over the coming weeks and the financial impact can be calculated, however, the expectation is that there should be sufficient budget or additional funding to cover what is agreed. The teachers’ pay award for 2023-24 has already been agreed to 31 July 2024 and the current budget is sufficient to cover the deal. For future years, a 2% increase had previously been built into the mid-range scenario, however there is pressure on Local Authorities for an increase beyond this therefore it is prudent to amend the assumptions contained within the budget outlook to 3% in 2024-25 falling back to 2% in 2025-26 onwards. Increments are estimated between £0.329m and £0.657m with mid-range £0.657m. A decrease to the long term employer contribution rate paid to Strathclyde Pension Fund (SPF) from 19.3% to 17.5% has resulted in a reduction to employee costs of £1.061m in all scenarios within the budget outlook. 1.7 For non-pay inflation, only unavoidable/inescapable inflation has been built in for the best case and mid-range scenarios with a contingency of £0.250m built into the mid-range. A further general inflationary increase has been built into the worst case scenario. 1.8 There are a number of cost and demand pressures for Council services built into each scenario. Changes to these pressures since the report on 13 October 2023 are: New – Waste – Increased gate fees for waste disposal in Helensburgh and Lomond. The contract with Barr Environmental is coming to an end and the extension for one year includes increased gate fees of £0.099m. Amended – Persistent Organic Pollutants (POPs) – the previous cost pressure has reduced by £0.023m due to updated information on tonnage rates. 1.9 In addition to the identified cost and demand pressures an allowance for unidentified cost and demand pressures has been included in mid-range of £0.500m per year (best case scenario £0.250m per year and worst case scenario £1m per year). 1.10 There will be a political decision to be made as to the future allocation to the Health and Social Care Partnership. As part of the budget agreed in February 2023, indicative allocations for 2024-25 to 2025-26 were agreed on the basis of a flat cash allocation. In the budget outlook I have assumed flat cash allocations across all three scenarios. 1.11 The budget gap in the mid-range scenario after allowing for the current base commitments, employee adjustments, non-pay inflation, cost and demand pressures and not factoring in any previous savings decisions or future Page 132
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potential options is an estimated gap over the five year period of £42.390m with a gap of £11.928m in 2024-25. 1.12 The measures to balance the budget over the next five years are as follows: Proposed increase to fees and charges of between 3% and 9% (6% mid- range). Proposed increase to Council Tax (5% increase in 2024-25 in all scenarios, reducing to a 3% increase in the mid-range and worst case scenarios in future years with the best case scenario remaining at 5%). Note this is still included at this stage despite the Council Tax freeze detailed at paragraph 4.8.3 as Scottish Government have committed to fund the planned increase. This will be monitored closely. Proposed implementation of 100% premium on Council Tax for second homes. Policy savings already agreed by Council in February 2022. Management/Operational savings already agreed by Council February 2023. Policy savings already agreed by Council in February 2023. 1.13 In the mid-range scenario, the budget gap estimated over the five year period 2024-25 to 2028-29 is £23.176m with a gap of £4.503m in 2024-25. 1.14 The budget gap in the best case scenario over the five years is £1.461m with a gap of £0.196m in 2024-25 and in the worst case scenario, the budget gap over the five years is £84.333m with a gap of £13.894m in 2024-25. A summary of all three scenarios is included within Appendix 1. 1.15 It is recommended that the Policy and Resources Committee: (a) Consider the current estimated budget outlook position for the period 2024- 25 to 2028-29. (b) Recommend to Council that the utilities budgets are right sized by utilising £0.936m of the £1.4m contingency that was set aside for inflationary increases as part of the 2023-24 budget setting process. (c) Recommend to Council that the shortfall in the teachers pay award funding is met by utilising £0.080m of the £1.4m contingency that was set aside for inflationary increases as part of the 2023-24 budget setting process. (d) Note that Argyll and Bute Council were selected as a Scottish Local Authority for a Levelling Up Partnership (LUP) with the UK Government and will therefore receive up to £20 million to address specific local challenges and opportunities. Page 133
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ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE FINANCIAL SERVICES 7 DECEMBER 2023 BUDGET OUTLOOK 2024-25 TO 2028-29 2. INTRODUCTION 2.1 This report provides an update to the budget outlook covering the period 2024- 25 to 2028-29, reported to the Policy and Resources Committee on 12 October 2023. 2.2 The budget outlook has been prepared using three different scenarios, best case, worst case and mid-range. Relatively small variations in assumptions can lead to fairly significant changes in the outcome. In the paragraphs that follow, the mid-range outlook is shown, however, all three scenarios are detailed within Appendix 1. 3. RECOMMENDATIONS 3.1 It is recommended that the Policy and Resources Committee: (a) Consider the current estimated budget outlook position for the period 2024- 25 to 2028-29. (b) Recommend to Council that the utilities budgets are right sized by utilising £0.936m of the £1.4m contingency that was set aside for inflationary increases as part of the 2023-24 budget setting process. (c) Recommend to Council that the shortfall in the teachers pay award funding is met by utilising £0.080m of the £1.4m contingency that was set aside for inflationary increases as part of the 2023-24 budget setting process. (d) Note that Argyll and Bute Council were selected as a Scottish Local Authority for a Levelling Up Partnership (LUP) with the UK Government and will therefore receive up to £20 million to address specific local challenges and opportunities. 4. DETAIL 4.1 Funding Scottish Government Finance Settlement 4.1.1 There are no changes to my previous assumptions around the level of future Scottish Government funding. In my report in October, I advised that in considering the assumptions relating to future years funding I have reflected on the funding over the last 4 years after accounting for new policy commitments, and also the spending review published in May 2022 which indicated that the Page 134
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4.1.2 total budget for Local Government would remain flat cash until 2026-27. As a result of this the assumptions in respect of future years Scottish Government funding range between a 0.5% increase (best case) and a 0.5% reduction (worst case) with a mid-range of 0%. In respect of the 2023-24 pay award for teachers, the Scottish Government agreed to make a financial contribution of £155m towards the recurring costs associated with the pay award for 2022-24. Argyll and Bute Council’s share of this funding is £2.392m and costs associated with the pay award are £2.472m, giving rise to a shortfall in funding of £0.080m. It is recommended that this shortfall is met from the £1.4m contingency for inflationary increases (which included pay) that was set aside as part of the 2023-24 budget setting process. 4.1.3 The table below summarises the mid-range scenario estimates based on a flat cash settlement. 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Estimated SG Funding 223,738 223,738 223,738 223,738 223,738 Teachers pay award funding 2,392 2,392 2,392 2,392 2,392 Estimated SG Funding 226,130 226,130 226,130 226,130 226,130 Council Tax 4.1.4 The Council Tax base for 2023-24 was set at £58.896m which reflected a 5% inflation increase and 1.5% growth in the Council Tax base in 2023-24 and 0.5% growth in future years as agreed by the Council on 23 February 2023. 4.1.5 There are no changes to my previous assumptions around the growth in Council Tax. It has been assumed that there will be a 0.5% growth in the mid-range scenario for all years from 2024-25 (0.75% in best case and 0.25% in worst case). 4.1.6 4.1.7 As reported previously, as part of the 2023-24 budget setting process a business process review was undertaken of the Revenues and Benefits Service where one of the outcomes was anticipated increased Council Tax recoveries equating to £0.264m in 2024-25. Furthermore, the creation of the self-funded Counter Fraud team also ensures minimum additional collections of £0.085m in 2024-25. These additional Council Tax recoveries totalling £0.349m in 2024-25 are built into the budget outlook. Within this report, I will present the budget gap, prior to any Member based decisions and therefore at this stage in the report, the Council tax base is assumed to remain at the same level as 2023-24. 4.1.8 The table below summarises the estimated total funding in the mid-range scenario. 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Page 135
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Estimated SG Funding 226,130 226,130 226,130 226,130 226,130 Council Tax Base 58,896 58,896 58,896 58,896 58,896 Council Tax Growth 294 590 887 1,186 1,486 Additional Council Tax recoveries (para 4.1.6) 349 200 202 204 206 Total Estimated Funding 285,669 285,816 286,115 286,416 286,718 4.1.9 As part of the UK Autumn Budget Statement announced on the 22 November 2023 Argyll and Bute Council were selected as a Scottish Local Authority for a Levelling Up Partnership (LUP) with the UK Government. Each Local Authority will receive up to £20 million through LUP to address specific local challenges and opportunities. A long list of options for the funding is to be prepared working with UK Government officials and will be presented to Members in due course. 4.2 Base Budget 4.2.1 4.2.2 The 2023-24 budget approved by Council on 23 February 2023 was £284.536m. There have been three changes to the base budget since the report on 13 October 2023: As mentioned at paragraph 4.1.2 the cost of the teachers pay award was £2.472m of which £0.080m will be funded from the £1.4m contingency set aside as part of the budget setting process. As part of the Council Tax Business Process Review £0.024m to fund posts associated with the work from the review is required to be built into the base and will be funded through the additional council tax generated Confirmation has been received regarding the level of specific grant funding for ferries for 2023-24 and it is higher than budgeted and includes funding for items that we had previously funded in-house. It is assumed that the grant will continue at least at the same level into 2024-25 and therefore there is a surplus of £0.191m that can be removed from the base budget. 4.2.3 For future years, there are adjustments required to the base budget from decisions by Council on 23 February 2023 and other adjustments as noted in the table below: 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Base Budget 2023-24 284,536 284,536 284,536 284,536 284,536 Remove one-off release of funding from the Earmarked Reserves in relation to the Capital Fund (1,536) (1,536) (1,536) (1,536) (1,536) Adjust for one-off 2023- 24 cost pressures (442) (442) (442) (442) (442) Adjust for one-off 2022- 8 0 0 0 0 Page 136
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23 Management/ Operational savings Adjust for one-off 2023- 24 Management/ Operational savings 2,581 2,581 2,581 2,581 2,581 Provision of floral displays 8 8 8 8 8 Cost of Teachers Pay Award 2,472 2,472 2,472 2,472 2,472 Shortfall in funding of pay award taken from £1.4m contingency (80) (80) (80) (80) (80) Adjustment to base budget re Business Process Review 24 24 24 24 24 Adjustment to ferries budget. (191) (191) (191) (191) (191) Revised Base Budget 287,380 287,372 287,372 287,372 287,372 4.3 Employee Cost Changes Pay Award 4.3.1 4.3.2 The SJC and Chief Officers pay award for 2023-24 has progressed further but has yet to be finalised and this may have an impact on the base budget if the pay award is greater than the total of what has been allowed for the in the budget and what Scottish Government are committing towards the pay deal. It is hoped that this will be finalised over the coming weeks and the financial impact can be calculated, however, the expectation is that there should be sufficient budget or additional funding to cover what is agreed. The Teachers pay award for 2023-24 has already been agreed (28 months deal covering the period 1 April 2022 – 31 July 2024) and as noted in paragraph 4.1.2 by utilising £0.080m from the £1.4m contingency set aside for inflationary increases as part of the 2023-24 budget setting process the current year budget is sufficient to cover the deal, however future negotiations will have an impact on the budget outlook. 4.3.3 For future years, a 2% increase had previously been built into the mid-range scenario, however, it is looking likely that this will be insufficient, based on the pressure to increase the current years pay offer. It would therefore be prudent to increase the assumption from 2% to 3% for 2024-25, reducing back to 2% from 2025-26 on the basis that reducing inflation could eventually take the pressure off the pay award. The best case scenario remains at a 2% increase (on the basis that the increase is not likely to be less than this) and the worst case scenario assumes a 5% increase. There remains a risk that the pay award could be higher and this will be monitored and updated throughout the year if more information becomes available. Every 1% over and above what is budgeted would add an additional pressure of circa £1.5m. Increments Page 137
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4.3.4 4.3.5 There are no changes to my previous assumption around the cost of employee increments. It has been assumed that for future years, the best case is assumed to be half of the previous year cost, for mid-range and worst case, assumes equal to the cost in 2023-24 (£0.657m). Strathclyde Pension Fund The Strathclyde Pension Fund (SPF) has reported an exceptionally strong set of results with a surplus of almost £9bn which will allow a reduction in the employer contribution rate. The largest employers, including 12 councils of which Argyll and Bute Council is one, will see a reduction in their employer contributions from 19.3% to 6.5% over the next two years, before reverting to a sustainable long-term rate in the third year of 17.5%. The recurring saving associated with the long term reduction to 17.5% is estimated to be £1.061m based on 2022-23 actual costs and this has been built into the budget outlook estimates in all scenarios. Note that these figures will be updated as salary calculations for the 2024-25 financial year are finalised. Options were presented to the Budget Working Group on 9 November 2023 as to how best to utilise the additional surplus in the first two years as a result of reducing contributions to 6.5% and this detail is included within the next report on the agenda. 4.3.6 The table below summarises the employee cost movements in the mid-range scenario for Council services. The employee cost increases relating to Social Work within the Health and Social Care Partnership are summarised within paragraph 4.6.3. 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Pay Award 4,574 7,714 10,917 14,184 17,517 Increments 657 1,314 1,971 2,628 3,285 Estimated SPF Employers Pension Rate reduction to 17.5% (1,061) (1,061) (1,061) (1,061) (1,061) Total Employee Cost Changes 4,170 7,967 11,827 15,751 19,741 4.4 Non-Pay Inflation 4.4.1 Over the last few years, the Council have only included non-pay inflation within the budget where it was deemed to be unavoidable or inescapable. In terms of the budget outlook, only unavoidable/inescapable non-pay inflation is built into the best case and mid-range scenarios with a general inflation allowance over and above this built into the worst case. 4.4.2 Officers continue to review areas of non-pay inflation on an ongoing basis. The principle of only budgeting for unavoidable/inescapable remains, however, it has to be noted that in this current financial climate, some budgets with no inflation allowed for are now stretched beyond the point of containing the cost within budget and therefore the budget will now buy less than what it used to be able to buy (so in effect, we will see some cuts as a result). Page 138
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4.4.3 When creating a budget outlook for future years, there is a risk that inflation assumptions could change during the year. Due to the current inflation uncertainty, it would be prudent to include a contingency for other inflation increases not included in the calculations. A contingency allowance of £0.500m is included within the worst case scenario and a £0.250m allowance included within the mid-range scenario each year. No contingency is included within the best case scenario. This contingency will either be required, reduced or removed to reflect changing circumstances before the 2024-25 budget is set. 4.4.4 The table below summarises the non-pay inflation in the mid-range scenario for Council services with more detail available in Appendix 2. The non-pay inflation increases relating to Social Work within the Health and Social Care Partnership are summarised within paragraph 4.6.3. Inflation Category 2024-25 Previous estimates (Oct 2023) £000 2024-25 Updated estimates £000 Increase/ (Decrease) £000 Utilities - Electricity, Gas, Oil, Water 930 834 (96) Street Lighting Electricity 121 121 0 Vehicle Fuel 50 52 2 Central Repairs - Outside Contractors 72 68 (4) Waste PPP/Landfill Tax 578 539 (39) NPDO/HUB Schools 956 796 (160) Community Pool Subsidies 95 68 (27) Residential Schools 49 48 (1) Pre-Primary Partner Providers 179 323 144 ICT 195 197 2 Catering Purchases and Milk 280 285 5 Insurance 81 81 0 Bitumen – Roads 24 24 0 Contingency for unidentified/ insufficient inflation estimate 250 250 0 Total 3,860 3,686 (174) 4.4.5 The most significant movement in non-pay inflation since last reported in October 2023 relates to NPDO/HUB schools, utility costs and Pre-Partner Providers. NPDO/HUB schools and utility costs are both estimated based on the projected inflation rate which has been reducing hence the reduction in value. Regarding Pre-Partner Providers, the 2024/25 uplift rate is based on an assumption that care staff will move to £12 per hour from April 2024 in line with the Scottish Government policy for Adult Social Care Staff which is matched for child care providers. 4.4.6 The cumulative inflation for years 2025-26 to 2028-29 is noted in the table below and is based on future years estimates of inflation at this point it time, however, due to the volatility of inflation recently it is very difficult to predict and the estimates will be kept under close review. Page 139
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2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Unavoidable/Inescapable 6,096 8,649 11,356 14,227 Total Non-Pay Inflation 6,096 8,649 11,356 14,227 4.5 Cost and Demand Pressures 4.5.1 4.5.2 4.5.3 4.5.4 Over the last few years, services have worked on the basis of having to contain any cost and demand pressures within current resources, however, there are a number of cost and demand pressures already identified for Council services which were reported as part of the budget in February 2023. Since the Policy and Resources Committee on 13 October 2023 the following changes have been made to the cost and demand pressures: New – Waste – Increased gate fees for waste disposal in Helensburgh and Lomond. The contract with Barr Environmental is coming to an end and the extension for one year includes increased gate fees of £0.099m. Amended – Persistent Organic Pollutants (POPs) – the previous cost pressure has reduced by £0.023m due to updated information on tonnage rates. The forward purchasing of the Council’s energy needs largely protected the Council from the significant increases in energy costs in recent years, particularly electricity. However, the Council is now re-contracting for its energy needs and is exposed to significantly higher market rates, which exceeds the current year (2023-24) budget. This will create an in-year cost pressure and also create a cost pressure for future years. The value of this pressure has been calculated by the Energy Team at £0.936m. During the 2023-24 budget setting process a contingency of £1.4m was agreed which was circa 0.5% of the Councils budget at that time. This was included due to the volatility in prices, the increases in inflation together with continuing increased demand. As agreed in October 2023, the Winter Maintenance budgets will be right sized using funding from this contingency, and per paragraph 4.1.2 the shortfall in teacher’s pay funding could also come from there. It is also recommended that the utilities inflationary pressure is funded from this contingency leaving a balance of £0.058m as detailed in the table below: Pressure £000 Right sizing Winter Maintenance Budgets as agreed at P&R Committee in October 2023 326 Utilities Cost Pressure 936 Underfunding of Teachers Pay Award 80 Total Inflationary Pressures to be funded from Inflationary Contingency 1,342 Balance remaining in Inflationary Contingency 58 The Council’s contract with Civica for the Revenue and Benefits Management Page 140
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4.5.5 System ends in August 2024, this is the system that allows us to bill and collect Council Tax and administer Housing Benefit on behalf of the UK government under statute. In addition the contract for the corporate Electronic Document Management system currently used by Revenue and Benefits services, Social Care, Human Resources and Creditors will end in September 2024. The Council is currently considering its options but there is pressure to migrate both of these systems to the Cloud as on premise support will not be available in the future which is likely to increase the annual costs although we do not have a definitive position on this as yet. The impact of this will be refined as conversations with our suppliers progress over the coming months therefore will be included within a future budget outlook once there is more certainty regarding the financial impact. The Council faces further substantial cost pressures that are largely capital in nature however should borrowing be required to fund these pressures there will be an impact on the revenue budget position. These include a new school campus on Mull, the Councils response to the recent weather incident and the discovery of Reinforced Autoclaved Aerated Concrete (RAAC) in a school. Further information and options on how these could be funded will be brought forward in due course. 4.5.6 As with inflation, when creating a budget outlook beyond one year, there is a risk that unknown cost and demand pressures will emerge that have not been included within the outlook. It is suggested that a £0.250m general allowance for this is included within the best case scenario, £0.500m within the mid-range scenario and a £1m allowance included within the worst case scenario each year. This contingency is over and above the £1.4m detailed in paragraph 4.5.3. 4.5.7 The cost pressures are detailed in appendix 3 and are summarised in the table below and will be subject to review during the financial year. 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Universal Credit – HB Admin Grant 40 80 120 160 200 IFRS16 Implementation Software 18 18 18 18 18 ASN Support 198 400 608 822 822 SEEMiS Membership Fees 2 4 7 7 7 Sustainable rate for partner providers 327 327 327 327 327 NPDO/HUB Schools – 2023-24 inflation 480 480 480 480 480 Election costs 0 0 0 300 0 Leisure SLA’s – 2023-24 inflation 10 10 10 10 10 Repairs and Maintenance – Helensburgh Waterfront Leisure Complex 105 105 105 105 105 Depots – saving shortfall 108 108 108 108 108 Waste (107) 87 (242) 128 128 Page 141
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Compliance with BMW Ban 0 608 2,433 2,433 2,433 Waste PPP Contracts – 2023-24 inflation 255 255 255 255 255 Persistent Organic Pollutants (POPs) 150 150 150 150 150 Waste – Increased Gate Fees for Waste Disposal 99 99 99 99 99 Local Development Plan 50 0 50 0 0 Insurances 126 126 126 126 126 Allowance for pressures in future years 500 1,000 1,500 2,000 2,500 Total Cost and Demand Pressures 2,361 3,857 6,154 7,528 7,768 4.5.8 The cost and demand pressures relating to Social Work within the Health and Social Care Partnership are summarised within paragraph 4.6.3. 4.6 Health and Social Care Partnership 4.6.1 The Council, at the budget meeting on 23 February 2023, agreed a base allocation to the HSCP of £76.253m for 2023-24 as well as indicative flat cash allocations for 2024-25 to 2025-26. 4.6.2 In the budget outlook, I have assumed flat cash allocations across all scenarios. These are only assumptions and it will be a matter for Council to consider as part of the budget process next year. 4.6.3 Social Work services have already identified a number of cost and demand pressures and these are summarised below and included within Appendix 4 for information purposes. It is expected that the HSCP absorb their cost and demand pressures from their funding allocation. Note that these only extend to three years rather than the five years within this Council budget outlook. 2024-25 £000 2025-26 £000 2026-27 £000 Pay Inflation 1,085 1,726 2,484 Pay Increments 152 304 456 Non-Pay Inflation 1,503 2,879 4,249 Care Services for Older People 444 895 1,353 Care Services for Younger Adults 419 846 1,282 Adult Services - Supported Living 150 299 299 Continuing Care for Looked After Children 0 250 500 Kintyre Care Centre 539 1,078 1,617 Unknown Cost and Demand Pressures 500 1,000 1,500 Total Cost Increase estimates for Social Work 4,792 9,277 13,740 4.7 Estimated Budget Gap PRIOR to Measures to Balance the Budget 4.7.1 The budget gap in the mid-range scenario after allowing for the current base Page 142
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commitments, employee adjustment, non-pay inflation and cost and demand pressures is summarised in the table below. This is the budget gap prior to factoring in any previous savings decisions or potential options towards balancing the budget. 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Base Budget 287,380 287,372 287,372 287,372 287,372 Employee Cost Changes 4,170 7,967 11,827 15,751 19,741 Non-Pay Inflation 3,686 6,096 8,649 11,356 14,227 Cost and Demand Pressures 2,361 3,857 6,154 7,528 7,768 Total Estimated Expenditure 297,597 305,292 314,002 322,007 329,108 Estimated Funding 285,669 285,816 286,115 286,416 286,718 Estimated Budget Surplus / (Gap) Cumulative (11,928) (19,476) (27,887) (35,591) (42,390) 4.8 Measures to Balance the Budget 4.8.1 In 2023-24 a general inflationary increase of 6% was applied to fees and charges. For the budget outlook a range of between 3% (worst case) and 9% (best case) with a mid-range of 6% has been included. There is no general inflationary increase of 6% applied to Piers and Harbours to ensure that any income generated is not in excess of expenditure. 4.8.2 Some of the policy options were agreed at the Council meeting on 23 February 2023 that impacted on 2024-25 and beyond. These are now factored into the budget outlook, reducing the budget gap. 4.8.3 4.8.4 In terms of Council Tax, a 5% increase had been assumed across all scenarios for 2024-25 on the basis that the majority of Councils increased their Council Tax by at least 5% in 2023-24 and this is something that Council could have considered for another year. However recently the Scottish Government announced a Council Tax freeze in 2024-25 and while they have committed to fully funding this freeze this will be monitored closely as more information becomes available. Until this clarity has been received there has been no further adjustment to the budget outlook in respect of this. From 2025-26 the assumption on the Council Tax increase has been reduced to 3% in the mid- range and worst case scenarios and left at 5% within the best case scenario. It will be a matter for Council to decide the level of Council Tax increase. The Scottish Government recently concluded a consultation on Council Tax for second homes and the outcome was announced in September 2023 advising that Local Authorities will be able to charge a premium of up to 100% (double charge) on council tax for second homes from 1st April 2024 bringing it in line with the policy already in place for empty homes. This legislation has still to be approved by Parliament however if progressed it would not only generate additional income for the Council to support delivery of services but may also help alleviate pressure on the local housing market and encourage long-term Page 143
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rental. On 23 November 2023 Council agreed to implement the double charge on second homes from 1 April 2024 should the legislation granting these powers be passed. Within the budget outlook £4m of additional income in respect of this has been included within the mid-range scenario, with £4.2m in the best case and zero in the worst case should Parliament not agree the legislation. It is assumed that Scottish Government will not impose that this income is ring fenced for any particular purpose. 4.8.5 The table below summarises the proposed measures to balance the budget in the mid-range scenario. 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Fees and Charges Increase 372 744 1,116 1,488 1,859 Council Tax Increase 2,960 4,848 6,795 8,811 10,896 Council Tax Second Homes Consultation 4,000 4,120 4,244 4,371 4,502 Policy Savings agreed February 2022 3 3 3 3 3 Management/Operational Savings agreed February 2023 45 80 80 80 80 Policy Savings agreed February 2023 45 293 769 1,405 1,874 Total Measures to Balance the Budget 7,425 10,088 13,007 16,158 19,214 4.9 Estimated Budget Gap AFTER Measures to Balance the Budget 4.9.1 The table below summarises the estimated budget gap in the mid-range scenario. 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Estimated Budget Gap Prior to Measures to Balance Budget (11,928) (19,476) (27,887) (35,591) (42,390) Savings Measures 7,425 10,088 13,007 16,158 19,214 Estimated Budget Surplus / (Gap) Cumulative (4,503) (9,388) (14,880) (19,433) (23,176) Estimated Budget Surplus / (Gap) In Year (4,503) (4,885) (5,492) (4,553) (3,743) 4.9.2 In the mid-range scenario, the budget gap estimated over the five year period 2024-25 to 2028-29 is £23.176m with a gap of £4.503m in 2024-25. 4.9.3 The budget gap in the best case scenario over the five years is £1.461m with a gap of £0.196m in 2024-25 and in the worst case scenario, the budget gap over Page 144
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the five years is £84.333m with a gap of £13.894m in 2024-25. A summary of all three scenarios is included within Appendix 1. 4.9.4 The changes from the previous anticipated outlook reported to the Policy and Resources Committee on 13 October 2023 are summarised in the table below: 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Previously reported budget surplus / (gap) Cumulative (4,768) (9,915) (15,706) (20,599) (24,728) Cost of Teachers Pay Award (2,472) (2,472) (2,472) (2,472) (2,472) Funding from the £1.4m contingency for teachers Pay Award 80 80 80 80 80 Business Process Review – Council Tax (24) (24) (24) (24) (24) Funding for Teachers Pay Award 2,392 2,392 2,392 2,392 2,392 Increased Ferry Grant Income 191 191 191 191 191 Adjustment to Non-Pay Inflation 174 436 736 1,076 1,461 Cost Pressure – Increased gate fees for Waste Disposal (99) (99) (99) (99) (99) Cost Pressure – Disposal of Persistent Organic Pollutants (POPs) 23 23 23 23 23 Revised Budget Surplus / (Gap) Cumulative (4,503) (9,388) (14,879) (19,432) (23,176) 5. CONCLUSION 5.1 In the mid-range scenario, the budget gap estimated over the five year period 2024-25 to 2028-29 is £23.176m with a gap of £4.503m in 2024-25. Council officers are continuing to explore savings options during 2023-24 and further information regarding these are included within the next report on the agenda. Consideration also needs to be given as to how best to fund the capital pressures faced by the Council and further information and options on how these could be funded will be brought forward in due course. 5.2 This is a very challenging budget outlook position and the level of Scottish Government grant, the pay award, the Council Tax freeze and the further potential cost and demand pressures outlined within the report could alter the figures significantly. These will be kept under close review and the budget outlook updated as and when further information becomes available. Page 145
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6. IMPLICATIONS 6.1 Policy - Sets out the budget outlook that provides the financial envelope for policy decisions. 6.2 Financial - Sets best, worst and mid-range scenarios in respect of the budget outlook. The medium to longer term financial strategy is being updated and the Council are actively continuing to pursue opportunities to mitigate against future budget gaps. 6.3 Legal - None directly from this report but Council will need to balance the budget. 6.4 HR - None directly from this report but there is a strong link between HR and budgets. 6.5 Fairer Scotland Duty - See below 6.5.1 Equalities None directly from this report but any proposals to address the estimated budget gap will need to consider equality issues. 6.5.2 Socio Economic Duty None directly from this report but any proposals to address the estimated budget gap will need to consider socio economic issues. 6.5.3 Islands Duty None directly from this report but any proposals to address the estimated budget gap will need to consider any island specific issues. 6.6 Climate Change The Council is committed to addressing climate change and reviews how Services are delivering this on an ongoing basis within the available budget resources. 6.7 Risk - None directly from this report but any proposals to address the estimated budget gap will need to consider risk. 6.8 Customer Service - None directly from this report but any proposals to address the estimated budget gap will need to consider customer service. Kirsty Flanagan Executive Director/Section 95 Officer 7 November 2023 Policy Lead for Finance and Commercial Services: Councillor Gary Mulvaney APPENDICES: Appendix 1 – Budget Outlook, Best, Worst and Mid-Range Scenarios Appendix 2 – Non Pay Inflation Appendix 3 – Cost and Demand Pressures (Council Services) Appendix 4 – Cost and Demand Pressures (Social Work) For further information contact Anne Blue, Head of Financial Services anne.blue@argyll-bute.gov.uk Page 146
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BUDGET OUTLOOK 2024-25 to 2028-29 APPENDIX 1 POLICY AND RESOURCES COMMITTEE - 7 DECEMBER 2023 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Base Budget 284,536 284,536 284,536 284,536 284,536 284,536 284,536 284,536 284,536 284,536 284,536 284,536 284,536 284,536 284,536 Base Budget Adjustments 2,844 2,836 2,836 2,836 2,836 2,844 2,836 2,836 2,836 2,836 2,844 2,836 2,836 2,836 2,836 Revised Base Budget 287,380 287,372 287,372 287,372 287,372 287,380 287,372 287,372 287,372 287,372 287,380 287,372 287,372 287,372 287,372 Pay Award 3,049 6,159 9,331 12,567 15,867 4,574 7,714 10,917 14,184 17,517 7,622 18,892 30,725 43,150 56,196 Pay Increments 329 658 986 1,315 1,643 657 1,314 1,971 2,628 3,285 657 1,314 1,971 2,628 3,285 Adjustment to Employee Base (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) (1,061) Total Employee Cost Changes (Council Services) 2,317 5,756 9,256 12,821 16,449 4,170 7,967 11,827 15,751 19,741 7,218 19,145 31,635 44,717 58,420 Non-Pay Inflation - Council Services 3,224 5,394 7,685 10,104 12,659 3,686 6,096 8,649 11,356 14,227 3,898 8,398 12,820 17,423 22,221 Housing Benefits Admin Grant 40 80 120 160 200 40 80 120 160 200 40 80 120 160 200 IFRS16 Implementation 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 ASN Support 198 400 608 822 822 198 400 608 822 822 198 400 608 822 822 SEEMIS Membership Fees 2 4 7 7 7 2 4 7 7 7 2 4 7 7 7 Sustainable Rate for Partner Providers 327 327 327 327 327 327 327 327 327 327 327 327 327 327 327 NPDO and HUB Schools 2023/24 inflation 480 480 480 480 480 480 480 480 480 480 480 480 480 480 480 Election Costs 0 0 0 250 0 0 0 0 300 0 0 0 0 350 0 Leisure SLA's 2023/24 inflation 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 Repairs and Maintenance - Helensburgh Waterfront Leisure Complex 105 105 105 105 105 105 105 105 105 105 105 105 105 105 105 Depots - saving shortfall 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 Waste (117) 9 (263) 37 37 (107) 87 (242) 128 128 (97) 165 (221) 218 218 Compliance with BMW Ban 0 0 462 925 925 0 608 2,433 2,433 2,433 0 608 2,433 2,433 2,433 Waste PPP Contract 2023/24 Inflation 255 255 255 255 255 255 255 255 255 255 255 255 255 255 255 Waste disposal of Persistent Organic Pollutants (POPs) 66 66 66 66 66 150 150 150 150 150 324 324 324 324 324 Waste - Increased Gate Fees 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 Planning (Local Development Plan) 50 0 50 0 0 50 0 50 0 0 50 0 50 0 0 Insurances 126 126 126 126 126 126 126 126 126 126 126 126 126 126 126 Allowance for Cost and Demand Pressures Future Years 250 500 750 1,000 1,250 500 1,000 1,500 2,000 2,500 1,000 2,000 3,000 4,000 5,000 Total Cost and Demand Pressures 2,017 2,587 3,328 4,795 4,835 2,361 3,857 6,154 7,528 7,768 3,045 5,109 7,849 9,842 10,532 Total Estimated Expenditure PRIOR to measures to balance the budget 294,938 301,109 307,641 315,092 321,315 297,597 305,292 314,002 322,007 329,108 301,541 320,024 339,676 359,354 378,545 Scottish Government Grant 227,238 228,363 229,493 230,629 231,770 226,130 226,130 226,130 226,130 226,130 225,022 223,909 222,801 221,699 220,603 Council Tax 59,687 59,983 60,433 60,887 61,344 59,539 59,686 59,985 60,286 60,588 59,394 59,397 59,549 59,702 59,856 Total Funding 286,925 288,346 289,926 291,516 293,114 285,669 285,816 286,115 286,416 286,718 284,416 283,306 282,350 281,401 280,459 Budget Surplus / (Gap) PRIOR to measures to balance the budget (8,013) (12,762) (17,715) (23,576) (28,201) (11,928) (19,476) (27,887) (35,591) (42,390) (17,125) (36,718) (57,326) (77,953) (98,086) Measures to Balance the Budget: Fees and Charges 558 1,116 1,673 2,231 2,789 372 744 1,116 1,488 1,859 186 372 558 744 930 Council Tax Increase 2,967 6,105 9,422 12,927 16,630 2,960 4,833 6,771 8,777 10,852 2,952 4,816 6,741 8,728 10,779 Council Tax Increase (Growth element) 0 59 122 188 259 0 15 24 34 44 0 30 48 67 87 Council Tax - Second Homes Consultation 4,200 4,410 4,631 4,862 5,105 4,000 4,120 4,244 4,371 4,502 0 0 0 0 0 Policy savings agreed February 2022 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 Management/Operational Savings agreed Feb 2023 45 80 80 80 80 45 80 80 80 80 45 80 80 80 80 Policy Savings agreed February 2023 45 293 769 1,405 1,874 45 293 769 1,405 1,874 45 293 769 1,405 1,874 Total Measures to Balance the Budget 7,818 12,066 16,700 21,696 26,740 7,425 10,088 13,006 16,157 19,214 3,231 5,594 8,199 11,027 13,753 Budget Surplus / (Gap) Cumulative AFTER measures to balance the budget (196) (697) (1,015) (1,879) (1,461) (4,503) (9,388) (14,880) (19,433) (23,176) (13,894) (31,125) (49,127) (66,926) (84,333) Budget Surplus / (Gap) In Year AFTER measures to balance the budget (196) (501) (318) (864) 418 (4,503) (4,885) (5,492) (4,553) (3,743) (13,894) (17,231) (18,002) (17,799) (17,407) Best Case Scenario Mid-Range Scenario Worst Case Scenario Page 147
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NON-PAY INFLATION (COUNCIL) Appendix 2 Service Category Basis of Inflation Inflation Percentage Mid Range 2023/24 Council Wide Electricity Due to current market condition for electricity 16% increase mid range, with a 0.5% tolerance for best and worst case. 16.00% 634,822 Council Wide Gas Due to current market condition for gas 15% increase with mid range based on latest information available from Property Services, with a 0.5% tolerance for best and worst case. 15.00% 133,355 Council Wide Heating Oils Due to current market condition for gas 6.70% increase with mid range reflecting September 2023 CPI rate, with a 0.5% tolerance for best and worst case. 6.70% 20,075 Council Wide Solid Fuel Based on Bank of England Monetary Policy Committee CPI Forecast for 2024 Q1, with a 0.5% tolerance for best and worst case. 4.30% 17,018 Council Wide Water Charges Due to current market condition for water 6.70% increase with mid range reflecting September 2023 CPI rate, with a 0.5% tolerance for best and worst case. 6.70% 28,895 Council Wide Vehicle Fuel Based on Bank of England Monetary Policy Committee CPI Forecast for 2024 Q1, with a 0.5% tolerance for best and worst case. 4.30% 51,618 Council Wide Central Repairs - Outside Contractors Based on labour and materials costs survey data from the Royal Institute of Chartered Surveyors (RICS) and information from the property team on the typical allocation of their costs between labour and materials. 3.39% 68,225 Council Wide Insurances Based on Bank of England Monetary Policy Committee CPI Forecast for 2024 Q1, with a 0.5% tolerance for best and worst case. 4.30% 81,435 Council Wide Contingency for unidentified/insufficient inflation estimate £250k built in to mid-range and £500k built in to worst case scenario 250,000 1,285,443 Education Pre-Primary Partner Provider Uplift Based on Bank of England Monetary Policy Committee CPI Forecast for 2024 Q1, with a 0.5% tolerance for best and worst case. 4.30% 322,964 Education External School Placements Based on Bank of England Monetary Policy Committee CPI Forecast for 2024 Q1, with a 0.5% tolerance for best and worst case. 4.30% 47,975 Commercial Services Catering Purchases Based on Office for National Statistics Inflation Rate for Food and Non-Alcoholic Beverages at September 2023, with a 0.5% tolerance for best and worst case . 12.20% 284,920 Legal & Regulatory Support Leisure SLA-MAKI/Islay Pools Based on average actual CPI rate for 2023 Q3, with a 0.5% tolerance for best and worst case. 6.70% 12,898 Legal & Regulatory Support Leisure SLA-Atlantis Based on RPI at September 2023 with a 0.5% tolerance in the best and worst case scenarios. 8.86% 55,289 Legal & Regulatory Support NPDO-Variable Element Based on average actual CPI rate for 2023 Q3, with a 0.5% tolerance for best and worst case. 6.73% 562,367 Legal & Regulatory Support NPDO-Utilities Rebate Based on average actual CPI rate for 2023 Q3, with a 0.5% tolerance for best and worst case. 6.73% -21,274 Legal & Regulatory Support NPDO-Electricity Due to current market condition for electricity 16% increase mid range, with a 0.5% tolerance for best and worst case. 16.00% 93,528 Legal & Regulatory Support NPDO-Gas Due to current market condition for gas 15% increase with mid range based on latest information available from Property Services, with a 0.5% tolerance for best and worst case. 15.00% 35,844 Legal & Regulatory Support NPDO-Heating Oil Due to current market condition for gas 6.70% increase with mid range reflecting September 2023 CPI rate, with a 0.5% tolerance for best and worst case. 6.70% 6,915 Legal & Regulatory Support NPDO-LPG Based on Bank of England Monetary Policy Committee CPI Forecast for 2024 Q1, with a 0.5% tolerance for best and worst case. 4.30% 3,863 Legal & Regulatory Support NPDO-Water Due to current market condition for water 6.70% increase with mid range reflecting September 2023 CPI rate, with a 0.5% tolerance for best and worst case. 6.70% 25,864 Legal & Regulatory Support HUB-Variable Element Based on average actual CPI rate for 2023 Q3, with a 0.5% tolerance for best and worst case. 6.73% 88,017 1,519,170 Customer and Support Services ICT Estimate based on feedback from ICT staff in relation to significant price increases for ICT services and equipment. 10.00% 197,455 Roads and Infrastructure Waste PPP-Private Contractor Inflation Based on 85% of the Bank of England Monetary Policy Committee RPIX Rate at September 2023, with a 0.5% tolerance for best and worst case. 6.46% 470,067 Roads and Infrastructure Waste PPP-Central Government Inflation Based on Landfill Tax increase between 22/23 and 23/24 with a 0.5% tolerance for best and worst case. Will be updated once the 2024/25 rate is published. 3.55% 68,777 Roads and Infrastructure Roads - Bitumen for Road Surfacing Based on Bank of England Monetary Policy Committee CPI Forecast for 2024 Q1, with a 0.5% tolerance for best and worst case. 4.30% 23,856 Roads and Infrastructure Electricity - Street Lighting Due to current market condition for electricity 16% increase mid range, with a 0.5% tolerance for best and worst case. 16.00% 120,958 881,113 3,685,726 Council Wide Total Executive Director Douglas Hendry - Total Executive Director Kirsty Flanagan - Total Total Non-Pay Inflation in the Mid Range Page 148
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COUNCIL COST AND DEMAND PRESSURES 2024-25 to 2028-29 Department Service Cost/Demand Pressure 2024-25 £,000 2025-26 £,000 2026-27 £,000 2027-28 £,000 2028-29 £,000 2024-25 £,000 2025-26 £,000 2026-27 £,000 2027-28 £,000 2028-29 £,000 2024-25 £,000 2025-26 £,000 2026-27 £,000 2027-28 £,000 2028-29 £,000 Executive Director - Douglas Hendry Education The demand for ASN support in Argyll and Bute has continued to grow with a significant increase in, and early identification of children and young people presenting with complex additional support needs, including mental health difficulties which manifests often in dysregulated behaviours. It is anticipated that growth continues over the next 5 years however the extent of this growth is difficult to determine. Scottish Government statistics show that the number of pupils identified with ASN has increased markedly since 2010 and there continue to be year on year increases. These increases are likely due to continue as we see the impact of the Covid 19 pandemic on children and young people who were born from 2020 onwards and as we work with partners to streamline assessment processes which help us to understand need more thoroughly. Scottish Government statistical datasets show that the percentage of school roll in mainstream schools of pupils with ASN has increased by approximately 3% year on year. Within many authorities, this means increased numbers of children accessing specialist provision. As Argyll and Bute do not have equitable access to Specialist provision in all areas, the cost pressure associated with offering appropriate support within our local schools continues to increase in line with need. 198 400 608 822 822 198 400 608 822 822 198 400 608 822 822 Executive Director - Douglas Hendry Education The SEEMiS group, provider of the Council's Education Management Information System, recently reviewed their long term financial plan and refreshed it to cover the period 2021/22 to 2025/26. As a result of this exercise there were implications on Membership fees with a cost pressure on the Education service arising from financial year 2023/24. Indicative membership fees were provided for financial years 2021/22 to 2022/23 and these have been factored in accordingly. 2 4 7 7 7 2 4 7 7 7 2 4 7 7 7 Executive Director - Douglas Hendry Education The Council has had a requirement to deliver 1140 hours of Early Learning and Childcare from August 2021. The Council has been notified that the ring fenced funding will be reduced by £1.124m from 2022-23. Also, as part of the 1140 expansion programme, the Scottish Government 'Funding Follows the Child' guidance, requires local authorities to set a rate locally that is paid to funded providers in the private and third sectors, including childminders, to deliver the funded entitlement that allows them to deliver a high quality ELC experience for all children. This rate should be sustainable and reflect national policy priorities, including funding to enable payment of the real Living Wage to all childcare workers delivering the funded entitlement and have a margin for re-investment built in. The service has worked hard to mitigate the effects of this and has reduced expenditure as far as possible. However there remains a funding gap, the service are able to cover the over spend for 2022-23 and 2023-24 from carry forwards so the cost pressure is requested from 2024-25 onwards. The service will continually review their plans looking for efficiencies where possible. 327 327 327 327 327 327 327 327 327 327 327 327 327 327 327 Executive Director - Douglas Hendry Education Adjustment to the base budget for the Schools NPDO and Hub Schools contracts due to the rate of inflation at February 2023 being higher than forecast when the 2023/24 budget was prepared. 480 480 480 480 480 480 480 480 480 480 480 480 480 480 480 Executive Director - Douglas Hendry Legal and Regulatory Services Estimated cost (to be borne by the Council) of carrying out local Government elections in May 2027 (and in financial year 2027/28). Operating approx. 100 polling stations and carrying out poll and count for 11 Multi member wards – requiring 11 separate counts 0 0 0 250 0 0 0 0 300 0 0 0 0 350 0 Executive Director - Douglas Hendry Commercial Services Adjustment to the base budget for the swimming pools service level agreements due to the rate of inflation at February 2023 being higher than forecast when the 2023/24 budget was prepared. 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 Executive Director - Douglas Hendry Commercial Services There is an ongoing need for the Council to manage the maintenance and repair of its buildings. Now that the new Helensburgh Waterfront Leisure Complex is operational there are additional pressures on this budget for maintenance and inspection of fabric, mechanical systems and electrical systems for this new asset. The cost of maintenance and inspection over the next 9 years is estimated at £939k, averaging £105k per annum. 105 105 105 105 105 105 105 105 105 105 105 105 105 105 105 Executive Director - Kirsty Flanagan Financial Services Universal Credit “Full” Service went live in Sept 2018, but managed migration has been deferred to 2023 and will not be completed until 2028. The DWP will reduce the Housing Benefit Administration Subsidy they pay to the Council as some claimants come off of Housing Benefit processed by Council staff and go onto Universal Credit processed by the DWP. The Council’s caseload has reduced marginally since implementation of Universal Credit but it is hard to predict just how quickly the rest of the working age caseload will migrate from Housing Benefit to Universal Credit between now and 2028. These figures represent our best estimates at this time. 40 80 120 160 200 40 80 120 160 200 40 80 120 160 200 Best Case Mid Range Scenario Worst Case APPENDIX 3 Page 149
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COUNCIL COST AND DEMAND PRESSURES 2024-25 to 2028-29 Department Service Cost/Demand Pressure 2024-25 £,000 2025-26 £,000 2026-27 £,000 2027-28 £,000 2028-29 £,000 2024-25 £,000 2025-26 £,000 2026-27 £,000 2027-28 £,000 2028-29 £,000 2024-25 £,000 2025-26 £,000 2026-27 £,000 2027-28 £,000 2028-29 £,000 Best Case Mid Range Scenario Worst Case APPENDIX 3 Executive Director - Kirsty Flanagan Financial Services Implementation of new IFRS16 system to manage leases and accounting requirements of the IFRS Finance Leases accounting standard. 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 Executive Director - Kirsty Flanagan Roads & Infrastructure Services Previously agreed saving from 2018-19 for Depots (TB07) is now not fully achievable with a shortfall of £107,500. Delays in progressing the Depot Rationalisation programme and limited capital investment available has resulted in the savings not being realised. Cost pressure to remove this saving with further work ongoing on the Depot Rationalisation programme which will hopefully generate further savings in the future. 108 108 108 108 108 108 108 108 108 108 108 108 108 108 108 Executive Director - Kirsty Flanagan Roads & Infrastructure Services Previously agreed saving from 2021-22 for Public Transport Fare increases (R&I17) is now not fully achievable with a shortfall of £29K. Report provided from Consultants Stantec outlining the proposed saving did not materialise due to a reduction in passenger numbers using local public transport. Executive Director - Kirsty Flanagan Waste Additional costs derived from the current waste model. Note that the treatment of waste going forward has not been fully costed due to uncertainty as to how the council will deal with the Bio Municipal Waste ban and the Deposit Return Scheme. Pressure has increased due to an updated waste model. (117) 9 (263) 37 37 (107) 87 (242) 128 128 (97) 165 (221) 218 218 Executive Director - Kirsty Flanagan Waste Achieving compliance with ban on biodegradable municipal waste in 2025. This is the estimated revenue costs from potential scenarios, remaining in or coming out of the current waste PPP contract. Coming out of the Waste PPP contract would create an additional one- off cost. There are also capital cost implications that are not included within these estimates. Due to the complexity of the model, estimates are subject to change. The best case scenario reflects option 4 detailed in the report to the Environment, Development and Infrastructure Committee on 01/12/2022. The mid range and worst case scenarios reflects option 3 included in the same report and take into account the risk that the SG will not agree a derogation. 0 0 462 925 925 0 608 2,433 2,433 2,433 0 608 2,433 2,433 2,433 Executive Director - Kirsty Flanagan Waste Adjustment to the base budget for the Waste PPP contract due to the rate of inflation at February 2023 being higher than forecast when the 2023/24 budget was prepared. 255 255 255 255 255 255 255 255 255 255 255 255 255 255 255 Executive Director - Kirsty Flanagan Waste Disposal of Persistent Organic Pollutants (POPs) as a result of the Persistent Organic Pollutants Regulation 2007 and the anticipated ban on placing these materials in landfill. Disposal of these will create a cost pressure to transport, shred and process the shredded material through Energy from Waste (EfW). 66 66 66 66 66 150 150 150 150 150 324 324 324 324 324 Executive Director - Kirsty Flanagan Waste Contract with Barr Environmental for waste disposal in Helensburgh & Lomond is coming to an end with the option to extend by 1 year. This extension will result in an increase in Gate Fee Rates resulting in increased costs for the extended year. Work has been carried out to determine whether it would be more beneficial to go to market and tender for a new contract but indicative work suggests that this would result in further increases so contract extension is being sought. Negotiations will take place over coming months for contract ending on 31 December. 99 99 99 99 99 99 99 99 99 99 99 99 99 99 99 Executive Director - Kirsty Flanagan Planning Local development plan will require to be done under the new Planning legislation which is a revised process from the current one and will have a 10 year life. The new process has 2 stages where there is likely to be a cost pressure - a gate check followed by an examination some time later. 50 0 50 0 0 50 0 50 0 0 50 0 50 0 0 Council Wide Council Wide Rightsize Council Insurance Budget - Insurance premiums have risen higher than previous inflationary forecasts due to changes in law, Increase in building values, higher contractor costs for building works, repairs and higher component parts for cars. 126 126 126 126 126 126 126 126 126 126 126 126 126 126 126 Council Wide Council Wide General provision for unidentified Cost and Demand Pressures 250 500 750 1,000 1,250 500 1,000 1,500 2,000 2,500 1,000 2,000 3,000 4,000 5,000 TOTAL 2,017 2,587 3,328 4,795 4,835 2,361 3,857 6,154 7,528 7,768 3,045 5,109 7,849 9,842 10,532 Page 150
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SOCIAL WORK COST AND DEMAND PRESSURES - 2024-25 to 2026-27 APPENDIX 4 Service Cost/Demand Pressure 2024-25 £000 2025-26 £000 2026-27 £000 2024-25 £000 2025-26 £000 2026-27 £000 2024-25 £000 2025-26 £000 2026-27 £000 All Social Work Estimated Pay inflation reflecting a best case 2%, a mid-range of 3.5% for 2024/25 then 2% for 2025/26 and 2026/27 and a worst case of 5%. Adjusted for the impact of the reduction in the employer's pension contribution rate to 6.5% in 2024/25 and 2025/26 and to 17.5% in 2026/27. 620 1,252 1,999 1,085 1,726 2,484 1,549 3,176 5,155 All Social Work Estimated Pay increments, best case is that 50% of the incremental changes based on 2023/24 are absorbed and in the mid-range and worst case, the increase is in line with the increase in 2023/24. 76 152 228 152 304 456 152 304 456 All Social Work Non-pay inflation, best and worst case based on unavoidable/inescapable inflation and worst case. 916 1,721 2,499 1,319 2,544 3,756 1,723 3,372 5,031 All Social Work Non-pay inflation impact of payroll inflation on NHS posts which are recharged to Social Work. 170 305 446 184 335 493 198 365 541 Adult Care Older People Demand Growth: The number of older people is increasing and older people are living longer with significant health and support needs and significant expectations of the support they are entitled to receive. Demand pressure estimates 3% growth in homecare and care home placements, this increase is supported by the growth in clients and care requirements over a number of years although in some areas the service capacity is being fully utilised and service expansion is proving difficult. The best case assumes a 0% increase in spending reflecting the limited service capacity in the area, the mid-range reflects 1.5% growth and the worst case reflects 3% growth. 0 0 0 444 895 1,353 889 1,805 2,748 Adult Care Younger Adults Demand Growth (Excluding Physical Disability): There has been continuing increase in demand for care and support services for profoundly disabled younger adults (ie under 65) whose parents have historically provided care but are no longer able to. The best case assumes a 1% increase in spending reflecting the limited service capacity in the area, the mid-range reflects 2% growth and the worst case reflects 3% growth. 179 360 543 359 725 1,098 538 1,092 1,663 Adult Care Younger Adults Demand Growth - Physical Disability: There has been continuing increase in demand for care and support services for profoundly disabled younger adults (ie under 65) whose parents have historically provided care but are no longer able to. The best case assumes a 1% increase in spending reflecting the limited service capacity in the area, the mid-range reflects 2% growth and the worst case reflects 3% growth. 30 60 91 60 121 184 90 183 279 Adult Care Phyisal Disability Budget Adjustment - The Physical Disability Supported Living and Residential budgets are carrying a recurring unbudgeted commitment. To address this situation, it is proposed to continue to realign the budget over 2024-25 and 2025-26 whilst also reviewing cases and redesigning services. The adjustment will be reviewed annually to reflect spending reductions delivered as well as any changes to funding and practice resulting from the implementation of the Independent Review of Adult Social Care. 52 103 103 52 103 103 52 103 103 Worst CaseMid RangeBest Case Page 151
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Adult Care Mental Health Budget Adjustment - The Mental Health Supported Living and Residential budgets are carrying a recurring unbudgeted commitment. To address this situation, it is proposed to continue to realign the budget over 2024-25 and 2025-26 whilst also reviewing cases and redesigning services. The adjustment will be reviewed annually to reflect spending reductions delivered as well as any changes to funding and practice resulting from the implementation of the Independent Review of Adult Social Care. 98 196 196 98 196 196 98 196 196 Children and Families Continuing Care demand for Looked After young people who are cared for by the HSCP. The best case scenario is that the expected additional demand can be funded from within existing resources as a result of planned improvements to the service delivery model (eg shift away from high cost external residential care to local foster and kinship care), the mid case reflects that additional demand in 24/25 be funded from existing resource with £250k per annum thereafter and the worst case reflects £250k per annum. 0 0 0 0 250 500 250 500 750 Adult Care Kintyre Care Centre - Cost pressure as a result of transfer of KCC facility to HSCP Management at the end of 2022/23 including continued programme to transfer employees onto Council/NHS employment T&Cs as well as provision for any unknown service costs at time of transfer. 539 1,078 1,617 539 1,078 1,617 539 1,078 1,617 All Social Work Allowance for unknown cost and demand pressures which could arise. The best case assumes unknown pressures totalling £250k per annum, the mid range £500k per annum and the worst case £750k per annum. 250 500 750 500 1,000 1,500 750 1,500 2,250 TOTAL UNFUNDED COST AND DEMAND PRESSURES 2,930 5,727 8,472 4,792 9,277 13,740 6,828 13,674 20,789 Page 152
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ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE FINANCIAL SERVICES 7 DECEMBER 2023 BUDGET UPDATE REPORT 1. INTRODUCTION 1.1 2. 2.1 3. 3.1 3.2 The purpose of this report is to provide an update on the 2024-25 budget setting process. RECOMMENDATIONS Members of the Policy and Resources Committe are asked to: i) Consider the budget update report and note that the items outlined in this report will feature in the Budget Pack in February 2024. ii) Note that options in relation to the funding of LEIP will be brought to a future meeting of the Council. BUDGET POSITION Since the budget outlook was presented to Policy Resources Committee on 12th October there have been a number of adjustments as detailed within the budget outlook report. The updated budget gap as a result of these adjustments is as follows: 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Estimated Budget Surplus / (Gap) Cumulative (4,503) (9,388) (14,880) (19,433) (23,176) In addition to the above, a cost pressure in relation to utilities of circa £1m had previously been highlighted throughout the year within the budget outlook report, albeit no value had been attributed within the figures until there was certainty around the level of cost pressure. The value of this has now been confirmed at £0.936m and a recommendation is included within the budget outlook report to fund this from the £1.4m contingency that was set aside as part of the budget setting process in 2023-24 for inflationary pressures. Should this not be agreed then this will increase the gap further. 4. 4.1 STRATHCLYDE PENSION FUND The Strathclyde Pension Fund (SPF) has reported an exceptionally strong set of results with a surplus of almost £9bn which will allow a reduction in the employer contribution rate. The largest employers, including 12 councils of which Argyll and Bute Council is one, will see a reduction in their employer contributions from 19.3% to 6.5% over the next two years, before reverting to a sustainable long-term rate in the third year of 17.5%. The estimated recurring saving associated with the long term reduction to 17.5% equates to £1.061m based on 2022-23 actual costs and has been already been built into the budget Page 153 Agenda Item 6
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4.2 4.3 4.4 4.5 5. outlook estimates included in the table at paragraph 3.1. Note that these figures will be updated as salary calculations for the 2024-25 financial year are finalised. Consideration is now required as to how best to utilise the additional surplus in the first two years as a result of reducing contributions to 6.5%. The gain in 2024-25 and 2025-26 for the Council is estimated to be £6.486m each year therefore £12.972m in total as a one-off saving. Given the significant gap in the budget in future years there are two officer recommendations in regards how this be utilised. Firstly, it is proposed that £8m of the gain is spread over four years to reduce the gap in the current year and future years by £2m each year. There will be significant challenges to bridge the increasing gaps in future years and this will go some way to assisting in that process. Secondly, again as a result of the position in future years it is recommended the remaining £4.972m is set aside for transformational/spend to save projects that could reep longer term benefits but require intial investment. There will also be a reduction to employer contributions for employees of Live Argyll from 19.3% to 15.1% over the next two years, before reverting to a sustainable long-term rate in the third year of 17.5%. This equates to circa £0.206m in 2024-25 and 2025-26, reducing to £0.088m in subsequent years on a recurring basis. The clear recommendation from officers, is that the Council reduces the management fee in line with the SPF adjustments to ensure that the Council receive the benefit, noting that it will have no financial impact for Live Argyll and the reduction in management fee will have a corresponding reduction in costs that they have to pay. Similarly the HSCP will also see a reduction in employer contributions of approximately £0.394m on a recurring basis with a one off saving in both 2024- 25 and 2025-26 of circa £2.405m. It is recommended by officers that the recurring saving of £0.394m is retained by the Council and that the £4.810m is ring-fenced within the Council reserves for utilisation by the HSCP in the future. The overall impact on the budget gap of the above recommendations in relation to the reduction in employer pension contributions is noted in the table below. 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Updated Budget Gap per para 2.2 (4,503) (9,388) (14,880) (19,433) (23,176) Council non-recurring saving over 4 years 2,000 2,000 2,000 2,000 0 Live Argyll saving – no bottom line impact to Leisure Trust 206 206 88 88 88 HSCP – recurring element only 394 394 394 394 394 Updated Budget Gap (1,903) (6,788) (12,398) (16,951) (22,694) £4.972m set aside for transformational/spend to save projects. £4.810m set aside for HSCP in future. FURTHER SAVINGS Page 154
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5.1 5.2 5.3 5.4 5.5 6. Education have identified two earmarked reserves that can be put forward as one-off saving options. The first relates to £0.800m of teacher strike monies and the second relates to COVID logistics funding that was received during the pandemic of which £0.500m is no longer required therefore can be passed back to the centre and used in 2024-25. It should be noted these are one-off in nature and not recurring savings. During September Financial Services worked with the Councils external Treasury advisors and our Banks to identify three loans that could be repaid early at a discount. These loans were taken out when interest rates were low and due to sufficient cash balances we were able to repay them at a discounted price. This released a gain totalling £0.294m which could be used to bridge the 2024-25 budget gap as a one-off saving. The updated position taking the above identified savings into accounts is noted in the table below. 2024-25 £000 2025-26 £000 2026-27 £000 2027-28 £000 2028-29 £000 Updated Budget Gap per para 3.5 (1,903) (6,788) (12,398) (16,951) (22,694) Education – Teachers Strike 800 0 0 0 0 Education – COVID Logistics funding 500 0 0 0 0 Financial Services – Treasury Gain 294 0 0 0 0 Updated Budget Surplus/(Gap) (309) (6,788) (12,398) (16,951) (22,694) It should be noted that the level of Scottish Government grant could have a significant impact on the reported position above. Currently a flat cash settlement has been built into the budget outlook based on the settlement over the last few years and the estimates within the spending review which indicate that a flat cash settlement in future years may be the most likely position, however any variation in this assumption could have a significant impact on these figures. The Scottish Government have announced a Council Tax freeze in 2024-25 and a postponement of proposed increases to Bands E-H. Currently the Council has a 5% increase built into the budget outlook figures in relation to Council Tax increases in 2024-25 which equates to £2.960m. The Scottish Government have advised the freeze will be funded hence no adjustment has been made at this stage to the budget outlook however we have had no confirmation as to what funding we will receive. This will be monitored closely as more information becomes available. Note that nothing had been built into the budget outlook in respect of the increase to Bands E-H. OTHER PRESSURES Learning Estate Investment Programme Page 155
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6.1 6.2 6.3 6.4 The Councils bid to the Scottish Governments Learning Estate Investment Programme (LEIP) for funding for a new school campus on Mull was successful. While this is good news and will provide welcome investment in the school estate it does come with a financial pressure that is required to be funded if the project is to proceed. The Scottish Government will fund up to 50% of eligible costs and the Council will require to fund the rest, potentially circa £20m. The Council has already set aside £9m within earmarked reserves but will need to determine how to fund the balance remaining. A report will be brought forward to a future meeting of the Council. Argyll and Bute Councils response to the weather incident As a result of significant rainfall Argyll and Bute Council activated the Bellwin scheme in relation to the recovery costs associated with the incident. The funding from this scheme is welcomed however eligibility criteria of costs are restrictive. Primarily the first £0.529m has to be covered by the Local Authority of which £0.398m has been identified from Crown Estates funding with the possibility this could be topped up further once the Crown Estate full year allocation of funding is confirmed. Secondly, capital expenditure does not qualify therefore any long term replacements to infrastructure such as bridges cannot be claimed through the scheme. The full costs from the weather incident are still being identified and a verbal update will be provided at the Policy and Resources Committee. Reinforced Autoclaved Aerated Concrete (RAAC) Surveys have been completed in the Councils Learning Estates in relation to RAAC with only 1 building confirmed as having it present with steps underway for its removal. This will include a decant of the students for approximately 9 months plus total removal and replacement of the roof during 2024. The estimated costs associated with this are £3m which will require additional funding. Funding Current options open to Members to help fund these additional pressures include the following: - Use of Asset Management Fund Earmarked Reserve - £2.098m - Use of Council’s Priorities Investment Fund - £7m - Utilise one-off pension saving set aside for transformational projects - £4.972m - Borrowing at a recurring cost to revenue. 7. CONCLUSION 7.1 Officers continue to monitor the budget outlook position regularly and update and report to Members any changes. The reported position at paragraph 5.3 does not reflect any additional costs associated with the weather incident and there will be further pressures associated with LEIP and RAAC. There is also uncertainty regarding the levels of funding that will be received from Scottish Government particularly in relation to the Council Tax freeze. Page 156
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8. IMPLICATIONS 8.1 Policy - None. 8.2 Financial - Sets out the financial position over the next five years. 8.3 Legal - None. 8.4 HR - None directly from this report but any savings options developed will have to consider the HR implications. 8.5 Fairer Scotland Duty - See below 8.5.1 Equalities None directly from this report but any proposals to address the estimated budget gap will need to consider equality issues. 8.5.2 Socio Economic Duty None directly from this report but any proposals to address the estimated budget gap will need to consider socio economic issues. 8.5.3 Islands Duty None directly from this report but any proposals to address the estimated budget gap will need to consider any island specific issues. 8.6 Climate Change The Council is committed to addressing climate change and reviews how Services are delivering this on an ongoing basis within the available budget resources. 8.7 Risk - None directly from this report but any proposals to address the estimated budget gap will need to consider risk. 8.8 Customer Service - None directly from this report but any proposals to address the estimated budget gap will need to consider customer service. Kirsty Flanagan Executive Director/Section 95 Officer 10 November 2023 Policy Lead for Finance and Commercial Services: Councillor Gary Mulvaney For further information contact Anne Blue, Head of Financial Services anne.blue@argyll- bute.gov.uk Page 157
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Page 1 ARGYLL AND BUTE COUNCIL POLICY & RESOURCES COMMITTEE Legal and Regulatory Services 7th December 2023 2024/2025 Annual Review - Procurement Strategy 2022/25 and Sustainable Procurement Policy 2022/25 1.0 EXECUTIVE SUMMARY 1.1 The purpose of this paper is to seek approval for the 2024/2025 Annual Review of the 2022/2025 Procurement Strategy and 2022/2025 Sustainable Procurement Policy. 1.2 This report outlines the requirement for the annual updates and the key changes that have been made to both the Procurement Strategy and the Sustainable Procurement Policy. 1.3 The first drafts of both documents were noted by the Procurement Board on 26th October 2023, the Departmental Management Team on 6th November 2023 and the Strategic Management Team on 20th November 2023. 1.4 The report recommends that the Policy & Resources Committee agree the Annual Review of the 2022/2025 Procurement Strategy and 2022/2025 Sustainable Procurement Policy, and documents to go on to the Strategic Management Team and Policy and Resources Committee. 1.5 Following the formal approval process both documents will be finalised and published in April 2024. Page 159 Agenda Item 7
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Page 2 ARGYLL AND BUTE COUNCIL POLICY & RESOURCES COMMITTEE Legal and Regulatory Services 7th December 2023 2024/2025 Annual Review - Procurement Strategy 2022/25 and Sustainable Procurement Policy 2022/25 2.0 INTRODUCTION 2.1 The purpose of this paper is to seek approval for the revised Procurement Strategy 2022/2025 and Sustainable Procurement Policy 2022/2025, following the Annual Review of both. 3.0 RECOMMENDATIONS 3.1 That the Policy & Resources Committee note the minor changes to the Procurement Strategy 2022/2025 and Sustainable Procurement Policy 2022/2025. 3.2 That the Policy & Resources Committee approves the final revised Procurement Strategy 2022/25 and Sustainable Procurement Policy 2022/25, to go on to the Full Council in February 2024. 4.0 DETAIL 4.1 All public bodies with an annual regulated procurement spend of £5 million and above must produce a Procurement Strategy under Section 15 of the 2014 Act. In terms of the Act, a public body which expects to have procurement expenditure of £5 million or more in the next financial year must, before the start of that year, either publish a Strategy, where one does not exist or review an existing strategy making such revisions to it as the body considers appropriate and publish its revised strategy. On publishing a revised Procurement Strategy, a public body must then notify Scottish Ministers by sending an e-mail to ProcurementStrategies@gov.scot with a link to where the revised strategy can be accessed. The Council published its 3 year Procurement Strategy 2022/2025, and this paper sets out the Annual Review of the Strategy for 2024/2025. This ensures that we meet the various obligations set out in the Strategy in a timeously manner. Page 160
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Page 3 4.2 The updated Procurement Strategy continues to set out a framework which enables the Council to continue on its journey of change and innovation through: Build capacity and skills within the Council to continue to improve procurement, commissioning and contract management activity; Promoting the benefits of early procurement engagement and innovation; Making sure we comply with our statutory procurement duties; Increasing the level of collaboration both internally, between service areas, and externally with other partner organisations; Making sure we continue to adopt a partnership approach between internal and external partners; Encouraging more innovative use of community benefits requirements and ensuring that community benefit outcomes have been achieved that deliver for our local communities; Engaging proactively with key suppliers through contract and supplier relationship demand management to ensure that we extract maximum value and innovation from our supply base; To enhance contract management throughout the Council to increase efficiency and deliver better value for money; Focusing our procurement activity on delivering best value improvements for the people and communities in Argyll and Bute; Working co-operatively in everything we do to support Small and Medium- sized Enterprises (SMEs) and the third sector organisations. Continue to improve access to public sector contracts, particularly for local SMEs, Supported Businesses, Social Enterprises, Co-operatives and Third Sector; Ensuring procurement activity contributes towards the Council’s general Equality Duty towards all stakeholders in Argyll and Bute and beyond; Continuing to promote sustainability, fair work practices and the importance of equality and equal treatment through procurement; Setting out clear and achievable strategic objectives which support delivery of the Council’s wider goals and objectives; and Making sure we continue to investigate and develop purchase to pay systems to improve our procurement methods. Page 161
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Page 4 4.3 Procurement Strategy Annual Review Outcomes The PCCMT has reviewed this Strategy to ensure it continues to meet all of the Council’s procurement requirements and objectives for the period 2024/2025. The review concluded all objectives remain the same and identified the following changes to the Strategy: Section 3 - Page 6-10: Procurement Vision & Principles have been updated. Section 5 - Page 14: Strategic Aims updated. Section 6 - Page 28: The Corporate & Education Category’s Analysis of the existing spend profile updated with 2022/2023 spend data. Section 6 - Page 31: The Construction & Environment Category updated. Section 6 - Page 33: The Care, Early Years & Housing Category updated. Section 7 - Page 38-40: The Financial Analysis section has been updated with 2022/2023 spend data. Section 9 - Page 44: Included sections for Tools and Procedures. 4.4 Sustainable Procurement Policy The Argyll and Bute Council Sustainable Procurement Policy 2022/2025 builds on existing sustainability practice. The policy covers the three strands of sustainability: environmental, social and economic, and aims to meet the substantial challenges of balancing the complexities of sustainable procurement within today’s economic climate and continued drive for best value. 4.5 Summary of key changes to the Sustainable Procurement Policy 2022/25 The Argyll and Bute Council Sustainable Procurement Policy 2022/2025 has been updated as follows: Item 1.3 - Page 54: “Argyll & Bute Council is one of the region’s major public money spenders with £163.1 million spent in 2022/23. Item 4 – Page 55: Updated links to internal policy documents and strategies. Item 5.1 / 3(e) - Page 57 To specify fresh, seasonal, nutritious and, where possible, organic food, and to not knowingly purchase genetically modified food or food with genetically modified ingredients; “to support the development of national and local policies in relation to food”. Page 162
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Page 5 4.6 The 2024/2025 Annual Review of the 2022/2025 Procurement Strategy and 2022/2025 Sustainable Procurement Policy is attached as Appendix 1. 4.7 The Council has a statutory requirement to update and publish both its Procurement Strategy and its Sustainable Procurement Policy on an annual basis following the key changes introduced by the Procurement Reform (Scotland) Act 2014 and the Procurement (Scotland) Regulations 2016. 4.8 Proposed Timetable The key timescales proposed for finalisation of the 2024/2025 Annual Review of the 2022/2025 Procurement Strategy and 2022/2025 Sustainable Procurement Policy is as follows: Date Timetable – 2024/2025 Annual Review of the 2022/25 Procurement Strategy/Sustainable Procurement Policy Aug-Oct 2024/25 Review of PS and SPP to be revised for next financial year Oct-Nov 2024/25 Annual Review of 2022/25 PS and SPP for next financial year to be approved by - Internal approvals process: PCCMT Meeting: 23rd Oct 2023 Procurement Board: 26th Oct 2023 (papers 18th Oct 23) DMT: 6th Nov 2023 (papers 1st Nov 23) SMT: 20th Nov 2023 (papers 15th Nov 23) Policy Lead Dec P&R: 7th Dec 2023 (papers 7th Nov 23) Jan Final 2024/2025 Annual Review of PS and SPP to PB for information January 2024 Feb Noted at Full Council Mar/Apr Publish on Website 5.0 CONCLUSION 5.1 The Procurement Strategy and Sustainable Procurement Policy have been reviewed in keeping with the Strategy requirements (Section 8.2) to ensure that it continues to meet the Council’s procurement objectives and outcomes as well as ensuring that the Council meet its statutory requirement to do so on an annual basis following the key changes introduced by the Procurement Reform (Scotland) Act 2014 and the Procurement (Scotland) Regulations 2016. Page 163
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Page 6 6.0 IMPLICATIONS 6.1 Policy: None 6.2 Financial: None 6.3 Legal: None 6.4 HR: None 6.5 Fairer Scotland Duty: 6.5.1 Equalities protected characteristics None 6.5.2 Socio-economic Duty None 6.5.3 Islands None 6.6 Climate Change: None 6.7 Risk: None 6.8 Customer Service: None Douglas Hendry Executive Director with responsibility for Legal and Regulatory Support Policy Lead: Councillor Alastair Redman 7th November 2023 For further information contact: Anne MacColl-Smith 01546 604194 Anne.maccoll-smith@argyll-bute.gov.uk Appendices Appendix 1: 2024/2025 Annual Review of 2022/2025 Procurement Strategy and 2022/2025 Sustainable Procurement Policy Page 164
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Appendix 1 PROCUREMENT STRATEGY 2022/2025 DRAFT - Annual Review 2024/2025 Page 165
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Procurement Strategy 2022/2025 The PCCMT has reviewed this Strategy, in line with Item 8.2 (page 41), to ensure it continues to meet all of the Council’s procurement requirements and objectives for the period 2024-2025. The review concluded all objectives remain the same and identified the following changes to the Strategy: Section 3 - Page 6-10: Procurement Vision & Principles have been updated. Section 5 - Page 14: Strategic Aims updated. Section 6 - Page 28: The Corporate & Education Category’s Analysis of the existing spend profile updated with 2022/2023 spend data. Section 6 - Page 31: The Construction & Environment Category updated. Section 6 - Page 33: The Care, Early Years & Housing Category updated. Section 7 - Page 38-40: The Financial Analysis section has been updated with 2022/2023 spend data. Section 9 - Page 44: Included sections for Tools and Procedures. Sustainable Procurement Policy 2022-2025 Item 1.3 - Page 54: “Argyll & Bute Council is one of the region’s major public money spenders with £163.1 million spent in 2022/23. Item 4 – Page 55 Updated links to internal policy documents and strategies. Annual Review 2024/2025 - Outcome Page 166
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Section 1: Overview………………………………………………………………….…… 1 Section 2: Introduction…………………………………………...…………………….… 4 Section 3: Procurement Vision & Principles ………………………………………...… 5 Section 4: Strategy Rationale & Context………………………………….………..… 11 Section 5: Aims, Key Priorities & Action Plan……………………………………....… 14 Section 6: Procurement Strategy by Category……………………………….……… 28 Section 7: Financial Analysis & KPI’s……………………………………….………… 38 Section 8: Implementation, Reviewing & Reporting…………………………….…… 41 Section 9: Policies, Tools & Procedures…………………………………………….…43 Section 10: Glossary…………………………………………………………………...… 46 Section 11: Strategy Ownership & Contact Details…………………………...…….… 52 Section 12: Sustainable Procurement Policy 2022/2025………………….……….… 53 Contents Page 167
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Section 1: Overview Page 1 of 60 Back to Contents The Procurement Strategy sets out the vision, objectives and actions which will direct and govern procurement activities for Argyll and Bute Council for 2022 to 2025, in other words, how and what the Council’s spends its money on over the next 3 years. The Strategy relates to our overall spending approach, with specific focus on regulated procurements. Regulated procurements are defined as works contracts over £2million in value, and supplies and services contracts over £50,000 in value. Argyll and Bute Council recognises the value of existing relationships with suppliers and contractors and seeks to build and strengthen those relationships. Local businesses and the third sector play a valuable role in supporting the work of the local authority. The Strategy aims to help remove the barriers often faced by smaller organisations with limited resources in bidding for work tendered by the Council. The Procurement, Commercial and Contract Management Team (PCCMT) has provided, and will continue to provide, support to local organisations by structuring tender opportunities, wherever possible, to enable local organisations to bid for Council contracts and by building their capacity to respond to formal procurements through local Meet the Buyer and other training events, and through promotion of the Supplier Development Programme. For this strategy, the Council has three key strategic procurement objectives: Legal compliance Value for money Empowering local suppliers Legal Compliance Aims To ensure all procurement staff and Council officers involved in the procurement process are fully aware of all aspects and impacts of the procurement rules and any other relevant regulations. Value for Money Aims To support the Council in achieving budget savings targets. To work closer with our client departments to understand their needs, identify opportunities to reduce expenditure, control demand and improve process efficiencies. Section 1 - Overview Page 168
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Section 1: Overview Page 2 of 60 Back to Contents Value for Money Aims Work more collaboratively with other public sector organisations to support Community Wealth Building across Argyll and Bute. Empowering Local Suppliers and Delivering Sustainable Procurement Aims We will aim to develop resilient local supply chains, providing clear advice and consistent approaches to procurement and community benefits, ensuring businesses are aware of, and are able to take advantage of, procurement opportunities supported by a programme of active and innovative supplier engagement and development support. How we will do it Mandatory training for Council officers involved in the procurement process (project leads, specification writers) including highlighting the social benefits that procurement must consider (for example, Equality and Fair Work First Practices). Ongoing training for procurement staff on changes to legislation and regulations. Continue to target savings from all aspects of the strategic procurement process (tender, contract management, P2P). Further embed and improve demand management within the contract management process. We will continue to develop our contract management framework as we understand that successful contracts depend on good contract management and good contract management depends on good supplier relations. We want to build good supplier relationships, including trust, openness, clear communications and common understanding. We will focus on how we can support the opening up of the supply chain and provide practical support and guidance to suppliers. We will analyse the supply chain in Argyll and Bute to identify specific areas of strength and opportunities to develop specific sectors and work closely with the Supplier Development Programme (SDP) to deliver effective supplier engagement and improve the capability of local businesses to bid for contracts. We will meet the national objectives for the prompt payment of suppliers and promote the prompt payment of subcontractors. Page 169
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Section 1: Overview Page 3 of 60 Back to Contents What will the outcomes be? We will have delivered simplified and more consistent procurement processes for businesses tendering for contracts across Argyll and Bute. We will have raised awareness among suppliers of forthcoming opportunities to bid for contracts. We will have supported small local businesses to access existing supply chains and increased their capability to successfully bid for contracts. Assist the Council to meet budget savings targets. Positive outcomes (for example, changes in buying behaviour, identifying alternative solutions, improved ordering and invoicing solutions). Whilst it would not be acceptable to give preference to local businesses during any particular procurement, efforts will continue to be made to ensure that local businesses are given the opportunity to bid for our contracts and to have the greatest chance of being successful in winning Council and other public sector business. Page 170
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Section 2: Introduction Page 4 of 60 Back to Contents 2.1 This Procurement Strategy sets out the vision, objectives and actions which will direct and govern procurement activities for Argyll and Bute Council for 2022 to 2025. 2.2 These reflect both national and local policies and priorities, and includes our approach to, Suppliers’ Fair Working Practices and Ethicality, Sustainability, Climate Change, Corporate Social Responsibility, Small and Medium-sized Enterprises (SMEs), Supported Businesses, and Third Sector organisations. 2.3 They recognise the current budget constraints and an increasing demand for goods, services and works. 2.4 Procurement is a key strategic driver to enable the business community and the communities we serve to adapt, diversify and flourish despite economic pressures. The present economic landscape has created unique but not insurmountable challenges for the area. 2.5 Procurement plays a pivotal role in supporting the Council’s strategic plan and will continue as a key enabling strand within the ongoing reform and continuous improvement of the Council. 2.6 The Argyll and Bute Council Procurement Strategy 2022/25 relates to our overall procurement approach, with specific focus on regulated procurements. Regulated procurements are defined as works contracts over £2million in value, and supplies and services contracts over £50,000 in value. 2.7 This Procurement Strategy has been prepared in response to the changing procurement agenda and the current financial climate. Previously, the Strategy has been renewed annually. This Strategy sets out the procurement aims and goals of the Council for 2022/25 and will be updated on an annual basis. These aims and goals reflect both national and local policies and priorities. Through adhering to the Procurement Strategy, the Council will manage and mitigate the potential risks associated with public sector procurement. Such risks include the potential for challenge from unsuccessful tenderers, the risk of not achieving best value for Council Services and failing to support the Council’s strategic aims. Section 2 - Introduction Page 171
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Section 3: Procurement Vision & Principles Page 5 of 60 Back to Contents Our vision Our vision is to be recognised by all Argyll and Bute stakeholders as a Procurement Team that works collaboratively, both internally as an embedded function of all Council services strategically used to support the economic, social and environmental needs of the residents of Argyll and Bute, and externally, to support Argyll and Bute communities; local small and medium enterprises; third sector organisations; social enterprises; supported businesses and micro-enterprises; whilst delivering value for money for the people of Argyll and Bute. Procurement Principles These are the basic tenets of how the Council intends to conduct its procurement. Eight procurement principles have been identified as follows: 3.1 Procurement should be a viable tool in the promotion of the Council’s Goals and Values and in delivering the Aims and Objectives contained within the Corporate Plan and Outcome Improvement Plan. 3.2 Procurement will be carried out under the terms of the Council’s Standing Orders and will be guided by the detailed procedures for purchasing developed by the Council via the Procurement Manual. 3.3 Procurement should be carried out in line with current legislation to deliver competition, sustainability, equal opportunities and ultimately best value for the Council. The process will be transparent and allow accountability. 3.4 Best Value will be achieved by obtaining Most Economically Advantageous Tender (MEAT), taking into account whole life costs and non-financial aspects of the purchase. Purchasing will be driven by desired outputs and results, including acceptable health and safety performance. 3.5 Suppliers should be able to meet the current and future needs of the Council and in arranging procurement; the needs of the local economy should be taken into account, as permitted by existing legislation and always in pursuit of best value. 3.6 Officers managing major contracts should be capable through qualification and experience, or have access to professional guidance, to be able to ensure the sound management and monitoring of contracts. The Council will put in place a training programme for all staff required to undertake procurement duties. Staff completing this programme will become “authorised to procure”. 3.7 The procurement function should be carried out in an effective but streamlined manner, which delivers added value without duplication of effort. 3.8 Where a local or national contract is in place for a commodity this will be used in all but exceptional circumstances. Section 3 – Procurement Vision & Principles Page 172
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Section 3: Procurement Vision & Principles Page 6 of 60 Back to Contents As a Procurement Team, supported by our Scottish Public Procurement community, we have a key aim to ensure that the collective spending power of the public sector is used to deliver world class, value-adding collaborative procurement services, while enabling sustainable and inclusive economic growth. As such, this Strategy is aligned to the Scottish Government’s recently published Public Procurement Strategy for Scotland. Its vision is to put public procurement at the heart of a sustainable economy to maximise value for the people of Scotland. The Public Procurement Strategy for Scotland was built upon the foundations set by the Public Procurement Priorities, which were in operation from May 2021 – April 2023, and have now been superseded by the Strategy. Within Procurement we have outcomes outlined by the Sustainable Procurement Duty, which requires us to buy in a way which is: These outcomes, which are supported by Scottish Government policies and guidance as well as sectorial and organisational policies and guidance, underpin and enable our work. To further support this, the Public Procurement Strategy for Scotland is structured around these areas, as well as acknowledging enablers to help achieve our aims. The enablers to this Strategy are fundamental to the success of the strategic aims and objectives. The enablers have been identified as underpinning the successful delivery across all elements of the Strategy. Page 173
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Section 3: Procurement Vision & Principles Page 7 of 60 Back to Contents Procurement Capability People are key. We must ensure the Procurement profession is developing individuals and teams. As well as attracting, developing and retaining new and existing procurement talent, leadership is essential. Supplier Development The supply chains we work with are fundamental to our success. Providing support and opportunities for suppliers to develop and to navigate the evolving landscape will contribute to positive outcomes for communities, society and organisations. Engagement Having appropriate shared processes and tools to provide consistency to both Procurement Professionals and suppliers. This will allow for efficient and effective delivery of Procurement services. Collaboration Collaboration will assist us in achieving our shared goals and anchoring our success in our communities, people and organisations. Strengthening collaboration and engagement across the Public Procurement landscape will allow consistent approaches where practical, and facilitate development and sharing of best practice OBJECTIVES The objectives are the very heart of the strategy. They set out how public sector bodies in Scotland can align. Good for Businesses and their Employees Maximise the impact of procurement to boost a green, inclusive and wellbeing economy, promoting and enabling innovation in procurement. By Business we include any organisation or enterprising entity engaged in commercial, industrial, or professional activities including, voluntary, charity, for- profit and non-profit entities. Page 174
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Section 3: Procurement Vision & Principles Page 8 of 60 Back to Contents Suppliers Promoting early supplier engagement to foster innovative and entrepreneurial responses to Public Sector needs and requirements. Collaborating with organisations to deliver positive, green and inclusive social impacts within public contracts. Having a holistic approach with key suppliers. Supply Chain and Resilience Encouraging a sustainable supply base that can support the work of the Public Sector to provide resilient and robust supply chains. Developing appropriate relationships and putting forward looking plans in place to support the development of the Supply Markets, improving security of supply and reducing risk. SMEs, Third Sector and Supported Businesses Consider how procurements are conducted and contracts are developed, to reduce barriers and enable participation for SMEs, Third Sector organisations, and Supported Business, in Public Sector Procurement. Contract Management Carrying out ongoing proportional contract management to ensure the right outcomes are delivered and the performance of contracts is maximised. Good for Places and Communities Maximising the impact of procurement with strong community engagement and development to deliver social and economic outcomes as a means to drive wellbeing by creating quality employment and skills. Community Wealth Building – Fair Work First and Community Benefits Maximising economic and social benefits through procurement and commissioning, applying fair work practices, developing good enterprises, and secure supply chains. Page 175
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Section 3: Procurement Vision & Principles Page 9 of 60 Back to Contents Supporting a sustainable built environment Maximising opportunities in procurement to develop, enhance and maintain a sustainable built environment. Creating a portfolio of frameworks delivering a range of construction activity across the public sector which considers the economic impact and the sustainability of the construction industry and the requirement for inclusive growth and climate change targets. Ensure construction projects reflect and help deliver all pertinent Scottish Government obligations including Fair Work First and Net Zero. Actively consider issues including but not limited to Fair Work First and Net Zero early in procurements and commissioning activity. Whole life costing Promoting sustainable procurement through routine consideration of whole life costing to ensure value for money in procurement, minimise environmental damage and maximise socio-economic benefits. Community Participation Engaging with communities to understand local needs and requirements to help shape procurement policies, initiatives and contracts. Climate Crisis and Environment Making informed decisions as we engage early with suppliers to create innovative solutions to positively respond to the climate crisis. Eliminating waste throughout the supply chain where possible. Act in a way that will secure net zero emissions through a Just Transition and promote a circular economy. Good for Society Ensure that we are efficient, effective and forward thinking through continuous improvement to help achieve a fairer and more equal society. Economic Wellbeing Make conscious and considered decisions that achieve best value and aims to establish practices and contracts that support the people and organisations of Scotland. Page 176
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Section 3: Procurement Vision & Principles Page 10 of 60 Back to Contents Emergency situations Procurement has been critical in responding to previous emergencies and humanitarian situations, and will strive to provide innovative, effective and efficient responses to future emergency situations. Food security Ensuring high standards of animal welfare and sustainable production and waste reductions through the procurement process to improve community health, wellbeing and education. Open and Connected Ensure procurement in Scotland is open, transparent and connected at local, national and international levels. Global Reach Remain connected to support development of best practice. Connectivity We will strive for an ease of doing business with the Public Sector and for the Public Sector to be able to easily do business with our suppliers. Take advantage of opportunities to develop and improve the data, management information and systems, while leveraging automation and future technologies. Consistency Promoting consistent use of tools, platforms and systems, processes, guidance and templates. Page 177
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Section 4: Strategy Rationale & Context Page 11 of 60 Back to Contents 4.1 Our principal aim is to ensure the principles of public procurement - transparency, integrity, openness, fairness, non-discrimination, equal treatment, competition and accountability - underpin our procurement activity. 4.2 We will also aim to build upon the achievements and benefits derived from the Council’s previous corporate procurement strategies which have been ongoing since 2012. These benefits and achievements include: All procurement opportunities are advertised, tendered and awarded electronically. All complex procurement exercises are supported by detailed sourcing strategy documents. Community benefits are considered for all procurement exercises above £100,000 for goods and services; and £2,000,000 for works. Sustainability considerations are included for all regulated procurements. If the market allows for it, for goods/services under £50k and works under £2million, SMEs and local suppliers are invited to bid for these contracts. Creation of an operating model consisting of a transactional PCCMT that focuses on lower value, less complex procurements and allows our category managers to focus on high value, complex procurements. Development of a robust, segmented contract management process The Council’s Procurement Strategy for 2022/25 takes account of the Annual Procurement Report 2022/2023, which detailed the progress that the Council has made since the previous Strategy was published. This allows us to reflect on the progress made as well as highlighting the opportunities and challenges now facing the Council, and how Procurement can support the organisations overall objectives. We will continue to generate process efficiencies and real cash savings through rigorous challenge of all our purchasing decisions, continue to work more cohesively and collaboratively with our internal clients and external stakeholders to identify better ways of working. This enhances our focus and considers innovative procurement methodologies to achieve best value outcomes in service areas such as social care. This Strategy aims to build on the procurement model already in place, with a view to: Section 4 – Strategy Rationale & Context Page 178
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Section 4: Strategy Rationale & Context Page 12 of 60 Back to Contents Setting out clear and achievable strategic objectives which support delivery of the Council’s wider goals and objectives. Making sure we comply with our statutory procurement duties. Delivering and demonstrating procurement benefits and real cash savings. Making sure we continue to investigate new technology and digital opportunities to improve our procurement methods. Continuing to promote sustainability, fair work first practices and the importance of equality and equal treatment through procurement. 4.3 The Council is mindful that the impact of procurement is far greater than this definition of a ‘process’ and our vision, objectives and principles as set out in this Strategy illustrate the contribution that effective procurement arrangements can make to wide ranging socio-economic agendas. These include equality and diversity, a successful local economy, a thriving voluntary and third sector, environmental issues and value for money for Argyll and Bute residents. 4.4 Current external impacts are demographic changes within Argyll and Bute, managing expectations of stakeholders within reduced budgets, environmental challenges including upcoming changes in relation to waste management and carbon reduction to meet climate change targets, and the need to ensure our processes are in line with current best practice. This Strategy continues to support the delivery of the Council’s Decarbonisation Plan. 4.5 Internal impacts on this Strategy and the Council’s PCCMT include the need to take account of the requirements of the Constitution, Corporate Plan and Outcome Improvement Plan, the provision of support to the service departments to meet their budgetary requirements, as well as the support provided to them to deliver transformational change in how they provide their services to the residents of Argyll and Bute. Page 179
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Section 4: Strategy Rationale & Context Page 13 of 60 Back to Contents 4.6 The Council will continue to deliver its procurement activities and meet the above opportunities and challenges in line with the Scottish Model of Procurement and the Public Procurement Strategy of Scotland: Page 180
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Section 5: Strategy Aims, Key Priorities & Action Plan Page 14 of 60 Back to Contents 5.1 Our strategic aims The Strategic Aims of the PCCMT support the overall Argyll and Bute Council Corporate Plan 2023-2027, specifically to support the Council in its mission to deliver our key priorities and make Argyll and Bute a place people choose to Live, Learn, Work and Do Business: People and Places - our core business as a Council Potential and Growth - turning opportunities into reality Partnership and Action - everyone has a part to play in Argyll and Bute’s success The team recognises the strategic importance of maximising the economic benefits from directing Council spend to local businesses in terms of benefiting the local economy to ensure it is growing, diverse and thriving. To support delivery of these outcomes, the PCCMT will continue to facilitate participation from local contractors in the procurement process to increase opportunity for local spend, where possible, by: a. Considering lotting strategies for all contracts and, where appropriate, dynamic purchasing systems to enable local suppliers the opportunity to access Council contracts. This will be documented in all contract strategies which will be prepared in advance of procuring all regulated contracts; b. If the market allows for it, for goods/services under £50k and works under £2million, SMEs and local suppliers will be invited to bid for these contracts; c. Simplifying tender documents to ensure the procurement process is proportionate and easy to navigate; d. Delivering an effective programme of supplier engagement and events across the region aligned to forthcoming contract opportunities, supporting our local small and medium sized businesses to meet their growth potential; e. Using community benefits clauses and approaches to help deliver additional benefits for the communities of Argyll and Bute; and f. Promoting the living wage and wider fair work first practices. Whilst it would not be acceptable to give preference to local businesses during any particular procurement, efforts will continue to be made to ensure that local businesses are given the opportunity to bid for our contracts and to have the greatest chance of being successful in winning Council and other public sector business. Section 5 – Aims, Key Priorities & Action Plan Page 181
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Section 5: Strategy Aims, Key Priorities & Action Plan Page 15 of 60 Back to Contents 5.2 For all of our procurement activity we aim to build upon the achievements and benefits derived from the Council’s previous corporate procurement strategies, with a view to: Build capacity and skills within the Council to continue to improve procurement, commissioning and contract management activity; Promoting the benefits of early procurement engagement and innovation; Making sure we comply with our statutory procurement duties; Increasing the level of collaboration both internally, between service areas, and externally with other partner organisations; Making sure we continue to adopt a partnership approach between internal and external partners; Encouraging more innovative use of community benefits requirements and ensuring that community benefit outcomes have been achieved that deliver for our local communities; Engaging proactively with key suppliers through contract and supplier relationship demand management to ensure that we extract maximum value and innovation from our supply base; To enhance contract management throughout the Council to increase efficiency and deliver better value for money; Focusing our procurement activity on delivering best value improvements for the people and communities in Argyll and Bute; Working co-operatively in everything we do to support Small and Medium- sized Enterprises (SMEs) and the third sector organisations. Continue to improve access to public sector contracts, particularly for local SMEs, Supported Businesses, Social Enterprises, Co-operatives and Third Sector; Ensuring procurement activity contributes towards the Council’s general Equality Duty towards all stakeholders in Argyll and Bute and beyond; Continuing to promote sustainability, fair work practices and the importance of equality and equal treatment through procurement; Setting out clear and achievable strategic objectives which support delivery of the Council’s wider goals and objectives; and Making sure we continue to investigate and develop purchase to pay systems to improve our procurement methods. Page 182
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Section 5: Strategy Aims, Key Priorities & Action Plan Page 16 of 60 Back to Contents 5.3 Our strategic objectives For this strategy, the Council has three key strategic procurement objectives: Legal compliance Value for money Empowering local suppliers 5.3.1 Legal Compliance Aims To ensure all procurement staff and council officers involved in the procurement process are fully aware of all aspects and impacts of the procurement rules and any other relevant regulations. How we will do it Mandatory training for council officers involved in the procurement process (project leads, specification writers) including highlighting the social benefits that procurement must consider (for example, Equality and Fair Work First Practices). Ongoing training for procurement staff on changes to legislation and regulations. What will the outcome be? Procurement staff are confident in their understanding of procurement regulations and other relevant regulations. Mitigation of the opportunities for procurement challenge. Procurement activity will comply with all relevant statutory and regulatory requirements. 5.3.2 Value for Money Aims To support the Council in achieving budget savings targets. To work closer with our client departments to understand their needs, identify opportunities to reduce expenditure, control demand and improve process efficiencies. Work more collaboratively with other public sector organisations to support Community Wealth Building across Argyll and Bute. Page 183
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Section 5: Strategy Aims, Key Priorities & Action Plan Page 17 of 60 Back to Contents How we will do it Continue to target savings from all aspects of the strategic procurement process (tender, contract management, P2P). Further embed and improve demand management within the contract management process. Continue to prioritise more procurement time for the development of relevant sourcing strategies to ensure that demand is fully understood (including future requirements) and that market analysis and supplier engagement is undertaken to establish the capabilities of the supply chain. Ensure that suppliers provide regular management information on our usage of their contracts and incorporate this information into the contract management process. Continue to look for opportunities to collaborate in procurement with our public sector partners and benchmark to ensure that collaborations provide best value. What will the outcome be? Assisting the Council to meet budget savings targets. Positive outcomes (for example, changes in buying behaviour, identifying alternative solutions, improved ordering and invoicing solutions). 5.3.3 Empowering Local Suppliers and Delivering Sustainable Procurement Aims We will aim to develop resilient local supply chains, providing clear advice and consistent approaches to procurement and community benefits, ensuring businesses are aware of, and are able to take advantage of, procurement opportunities supported by a programme of active and innovative supplier engagement and development support. How we will do it We will continue to develop our contract management framework as we understand that successful contracts depend on good contract management and good contract management depends on good supplier relations. We want to build good supplier relationships, including trust, openness, clear communications and common understanding. We will focus on how we can support the opening up of the supply chain and provide practical support and guidance to suppliers. Page 184
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Section 5: Strategy Aims, Key Priorities & Action Plan Page 18 of 60 Back to Contents We will analyse the supply chain in Argyll and Bute to identify specific areas of strength and opportunities to develop specific sectors and work closely with the Supplier Development Programme (SDP) to deliver effective supplier engagement and improve the capability of local businesses to bid for contracts. We will meet the national objectives for the prompt payment of suppliers and promote the prompt payment of subcontractors. What will the outcome be? We will have delivered simplified and more consistent procurement processes for businesses tendering for contracts across Argyll and Bute. We will have raised awareness among suppliers of forthcoming opportunities to bid for contracts. We will have supported small local businesses to access existing supply chains and increased their capability to successfully bid for contracts. 5.4 Supplier Opportunities We are pleased to hear from new and existing suppliers who are interested in tendering for business. Any enquiries can be sent to the corporate procurement inbox procurement@argyll-bute.govuk. The PCCMT has developed a supplier page on the Council’s website with useful tips and information as to how to bid for Council contracts. In addition, the Council’s current contract register is available on the Council website and gives visibility of current contracts and the corresponding end dates. Any contracts requiring renewal, as well as any new requirements, will be advertised and tendered via the following e-tendering portals: Public Contracts Scotland Tender (PCS-T) Regulated Procurement (Goods/Services >£50,000, Works >£2 million) Public Contracts Scotland (PCS) Quick Quotes (Goods/Services <£50,000, Works <£2 million) All Quick Quotes undertaken by the Council will include an invitation to at least one SME and, if the market allows, at least one local supplier. Any company interested in bidding for business with the Council must be registered with Public Contracts Scotland (PCS), and be in a position to submit their responses using these portals. The strategy objectives and the targeted outcomes will be monitored via an action plan detailed as follows: Page 185
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Section 5: Strategy Aims, Key Priorities & Action Plan Page 19 of 60 Back to Contents Procurement Strategy Action Plan 5.4.1 Legal Compliance Objectives Aims & Outcomes Performance Indicators Actions Target Date Owner Aim: To ensure all procurement staff and Council officers involved in the procurement process are fully aware of all aspects and impacts of the procurement rules and any other relevant regulations. To adapt to any changes to procurement rules following Brexit. Outcome: Mitigation of the opportunities for procurement challenge. Procurement activity will comply with all relevant statutory and regulatory requirements. Procurement staff are confident in their understanding of procurement regulations and other relevant regulations. No legal challenge 1.01 Mandatory training for Council officers involved in the procurement process (project leads, specification writers) including highlighting the requirement for project / contract management, excellent communication skills, varying contracts, budget variances and social benefits that procurement must consider (for example, Equality and Fair Work First Practices). 1.02 Ongoing training for procurement staff on changes to legislation and regulations. 1.03 Adapt our internal procedures, processes and documentation, where required, to reflect any new legislative requirements. Ongoing Ongoing Ongoing ELT PCCMT Manager PCCMT Manager Page 186
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Section 5: Strategy Aims, Key Priorities & Action Plan Page 20 of 60 Back to Contents 5.4.2 Value for Money Objectives Aims & Outcomes Performance Indicators Actions Target Date Owner Aim: To support the Council in achieving budget savings targets. Outcome: Assisting the Council to meet budget savings targets. Positive outcomes (ie: changes in buying behaviour, identifying alternative solutions, improved ordering and invoicing solutions). To work closer with our client departments to understand their needs, identify opportunities to reduce expenditure, control demand and improve process efficiencies. Work more collaboratively with other public sector organisations. Savings for budget holders. Reduced expenditure. 2.01 Continue to target savings from all aspects of the strategic procurement process (tender, contract and demand management, P2P). 2.02 Further embed and improve contract and demand management within the client’s service areas. 2.03 Continue to prioritise more procurement time for the operational development of appropriate sourcing strategies to ensure that demand is fully understood (including future requirements) and that market analysis and supplier engagement is undertaken to establish the capabilities of the supply chain. 2.04 Ensure that suppliers provide regular management information on our usage of their contracts and incorporate this information into the contract management process. 2.05 Continue to look for opportunities to collaborate in procurement with our public sector partners and benchmark to ensure that collaborations provide best value. Ongoing Ongoing Ongoing Ongoing Ongoing PCCMT PCCMT PCCMT PCCMT/ ELT PCCMT Page 187
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Section 5: Strategy Aims, Key Priorities & Action Plan Page 21 of 60 Back to Contents 5.4.3 Empowering Local Suppliers and delivering sustainable procurement Objectives Aims & Outcomes Performance Indicators Actions Target Date Owner Aim: To develop resilient local supply chains, providing clear advice and consistent approaches to procurement and community benefits, ensuring businesses are aware of, and are able to take advantage of procurement opportunities, supported by a programme of active and innovative supplier engagement and development support. To increase the knowledge and understanding of the benefits of sustainable procurement of all Council staff who participate in the procurement process and make better use of the expertise within the Council to ensure wider sustainable outcomes are achieved. To be compliant with the Procurement Reform (Scotland) Act 2014 and general other duties contained therein, including the Sustainable Procurement Duty. Outcome: Increased opportunities for local businesses, co-operatives, Supported Businesses and Third Sector organisations. To secure wider social, economic and environmental benefits for the local area and ensure those benefits are realised. We will have delivered simplified and more consistent procurement processes for businesses tendering for contracts across Argyll & Bute. We will have raised awareness among suppliers of forthcoming opportunities to bid for contracts. We will have supported small local businesses to access existing supply chains and increased their capability to successfully bid for contracts. Procurement spend with contracted suppliers (%) Contracts awarded to SMEs (% of contracts awarded) Local suppliers bidding for business with the Council (% of bids received) Tenders won by a local supplier where a local supplier has placed a bid (%) Increase the number of community benefits that are delivered through contracts we award locally. Invoices paid within 30 days (%) Training and awareness sessions for internal client departments on sustainable procurement with an emphasis on the application of circular economy, whole life costing and life cycle impact mapping. Further optimise the community benefits process by working more closely with relevant internal stakeholders (community planning, Benefits Steering, employability team) and placing a greater emphasis on ensuring outcomes are delivered and benefits for Argyll and Bute residents are realised. Ongoing Ongoing PCCMT Manager PCCMT Page 188
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Section 5: Strategy Aims, Key Priorities & Action Plan Page 22 of 60 Back to Contents 5.5 Mandatory Requirements of the Procurement Reform (Scotland) Act 2014 and Statutory Guidance Obligations. The Act lays out some mandatory requirements which the procurement strategy must include. In particular: 5.5.1 Legal Compliance # How the organisation intends to make sure that its regulated procurements will: Activities 1 Be undertaken in compliance with its duty to act in a transparent and proportionate manner o A The Council’s Standing Orders Relating to Contracts and Procurements apply to all contracts made by or on behalf of the Council for the delivery of works, the supply of goods and materials and the provision of services. o All procurement activity undertaken must comply with the above process and procedures which secures compliance with the Act and Statutory Guidance. In addition to the above, the Council engages fully with the Supplier Development Programme (SDP), to understand their organisational needs and share the Council’s procurement work plan. o B PINs will be published on PCS for all appropriate regulated procurements in 2022/25. o C Consideration will be given within the initial Commodity Sourcing Strategy (CSS) to lotting all regulated contracts in 2022/25. o D We will offer alternative language formats when requested. 2 o Payment of a living wage - to persons involved in producing, providing or constructing the subject matter of regulated procurements o A Consideration will be given at the initial stages of individual regulated procurements to whether it is relevant to address living wage and fair work practices. Page 189
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Section 5: Strategy Aims, Key Priorities & Action Plan Page 23 of 60 Back to Contents 5.5.1 Legal Compliance # How the organisation intends to make sure that its regulated procurements will: Activities 2 Payment of a living wage - to persons involved in producing, providing or constructing the subject matter of regulated procurements B Payment of the Living Wage will be monitored by contract management activity in relevant regulated contracts. 3 The use of community benefit requirements A Community Benefits Clauses will be included in regulated procurements as outlined in the Sustainable Procurement Policy 2022/25. B Report on the methodology of delivering community benefits that have been requested by our local communities. 4 Promoting compliance with health and safety at work, including how a supplier/ sub-contractor demonstrates compliance. A Health and Safety considerations will be included at all stages of regulated procurement processes in 2022/25. B All regulated works procurements in 2022/25 will include reference to the current CDM regulations. 5 Complying with the Council’s Sustainable Procurement Policy (Appendix 2) in relation to the procurement of fairly and ethically traded goods and services. A The procurement of fairly and ethically traded goods and services will be considered within the CSS of all regulated procurements in 2022/25. Page 190
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Section 5: Strategy Aims, Key Priorities & Action Plan Page 24 of 60 Back to Contents 5.5.1 Legal Compliance # How the organisation intends to make sure that its regulated procurements will: Activities 6 Food procurement o A Any regulated catering contracts carried out in 2022/25 will consider the following national guidance throughout the procurement process: ‘Better Eating, Better Learning’; ‘Beyond the School Gate’; ‘Soil Association Food for Life Catering Mark’; ‘Catering for Change: Buying Food Sustainably in the Public Sector’; and ‘Becoming a Good Food Nation’. The Council will continue to look for opportunities to include local and sustainable food wherever possible in schools, facilities, venues and to meet social care requirements. o The Council is committed to including health and wellbeing and animal welfare procurement requirements that promote the health, wellbeing and education of communities. Procurement requirements relating to Food procurement focus on nutritional quality, health and wellbeing, minimising environmental impact such as packaging and sourcing as well as the application of appropriate animal welfare standards in accordance with all relevant legislation. The Council will ensure that procurement requirements relating to Fairly and Ethically Traded Goods and Services are applied in a relevant, proportionate and legally compliant manner. 7 Comply with the sustainable procurement duty. A Staff involved in the procurement process understand and positively contribute to achieving sustainable outcomes. The Council is reassured that suppliers adhere to the principles of a Fair Work First Practice organisation. B Inclusion of a mandatory sub-contracting clause in regulated procurements where relevant and proportionate. C Promote sub-contracting opportunities to SMEs through promoting the use of PCS on the Council’s website. Page 191
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Section 5: Strategy Aims, Key Priorities & Action Plan Page 25 of 60 Back to Contents 5.5.1 Legal Compliance # How the organisation intends to make sure that its regulated procurements will: Activities 7 Comply with the sustainable procurement duty /contd D Share knowledge and participate in events aimed specifically at local SMEs and third sector bodies, and Scottish suppliers, for example, by publicising Supplier Development Programme events and providing assistance with the tender process through Business Gateway. E Review existing method of engaging with local supply base and engage with Communications Team and Business Gateway to target a wider audience of potential new suppliers, with the aim of increasing the number of new suppliers on our quick quote distribution list. Page 192
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Section 5: Strategy Aims, Key Priorities & Action Plan Page 26 of 60 Back to Contents 5.5.2 Value for Money # How the organisation intends to make sure that its regulated procurements will: Activities 8 Deliver value for money A The successful delivery of this strategy. o The application of procurement best practice and undertaking key strategic procurement activities. o Early market engagement. o By including appropriate lots to promote SME/Third Sector and local supplier participation. o Maximising the impact of each pound spent by including Community Benefit Clauses. o Evaluating on the most economic and advantageous criteria. o Utilisation of output specifications. o Challenging the need and demand management. o Robust contract management. Application of effective commercial evaluation models. 9 Contribute to the carrying out of its functions and the achievement of its purposes. A The delivery of this strategy will ensure procurement is delivered in a compliant, effective and efficient manner, provide a clear action plan for improvement and contribute to wider Council objectives and priorities. By making sure there is early engagement and clear communication channels between the Service Departments and procurement will assist in achieving best value. This strategy will be monitored and reported as per the Monitoring, Reviewing and Reporting on the Strategy section of this strategy document, to make sure the key objectives are delivered and best value is secured. Page 193
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Section 5: Strategy Aims, Key Priorities & Action Plan Page 27 of 60 Back to Contents 5.5.3 Empowering Local Suppliers # How the organisation intends to make sure that its regulated procurements will: Activities 10 The provision of prompt payment – no later than 30 days after invoice by the organisation to a supplier and/or sub-contractor, or by a sub-contractor to a sub-contractor. A We will aim to meet the target of 95.5% per quarter of invoices paid within 30 days during 2022/25. B Prompt payment clauses requiring a 30 day payment term are embedded within our contractual terms and conditions. Suppliers are required to apply the same terms and conditions with their sub-contractors who are delivering and supporting the Council contract. 11 Consulting and engaging with those affected by its procurements. A Consultations with relevant stakeholder groups will be carried out at the CSS stage of regulated procurements in 2022/25, where relevant and proportionate. 5.6 Key Performance Indicators by which we will measure the success of the Action Plan are detailed in Section 7. 5.7 The Council’s current Contract Plan can be found here. Page 194
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Section 6: Procurement Strategy by Category Page 28 of 60 Back to Contents CORPORATE & EDUCATION Scope/Key Spend Areas The Corporate & Education Category consists of the following areas: Education Corporate ICT HR/Training Transport (including Bus, Air, Boats & Fleet) Catering & Cleaning Economic Development Travel & Accommodation Leisure & Sports Within Corporate & Education, our overall strategy is to work with all relevant services to review existing contracts or identify new needs and schedule procurement exercises as needed. In doing this, we determine the most appropriate procurement route for the requirement and engage the market as early as possible dependant on the procurement route selected. 2022/25 Strategy Analysis of the existing spend profile (financial year 2022/23) across the Corporate & Education Category has identified the volume of uncontracted suppliers as a priority areas of focus. The analysis breaks down as follows: Spend Type Number of Orders Total value (£) Number of suppliers Average transaction value (£) Total Percentage Contracted 22627 £22.7m 292 £1,002.72 86.62% Uncontracted 6782 £3.5m 368 £516.48 13.38% A combination of the followings actions will be in our strategy to address this: To continue to support all services to source and purchase goods and services from national and CAT C contracts where possible. To continue to increase the remit of the Transactional Purchasing Team (TPT) and grow the team’s procurement knowledge and skills to aid services in ensuring best value is achieved for all low value spend. To continuously review the eProcurement System (PECOS) to ensure catalogues and suppliers are up to date and available for use by both the TPT and service end users. Section 6 – Procurement Strategy by Category Page 195
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Section 6: Procurement Strategy by Category Page 29 of 60 Back to Contents Continue to review the system setup of PECOS, test new functionality as it becomes available/resource allows and implement to improve user experience where possible. To continue to work with all services to implement the No PO No Payment; eventually resulting in the stopping of all relevant manual batched payments and providing the PCCMT access to line item detail of all supplier spend. Continue to support Education Services with all procurement activity via their newly established Education Purchasing Team to increase Education’s volume of spend under contract. Short/Medium Term Strategy The short-term strategy for the procurement of goods and services within Corporate & Education over the next 2-3 years is: Transactional Purchasing Team (TPT): Continue to increase the volume of uncontacted spend directed to the TPT for sourcing. Increase volume of Invitation to Quotes (ITQs) processed and awarded via TPT. Complete the roll out of requesting corporate purchases and travel and accommodation requests via PECOS and stop all emailed requests. National Contracts: As new national contracts become available, assess suitability and carry out Best Value review. If deemed appropriate, roll out to relevant users and on PECOS. PECOS: Promote the use of CAT C and collaborative contracts to achieve best value via the PECOS Noticeboard and email communications to both TPT staff and PECOS end users. Contract Management: Continue to undertake contract and supplier management meetings with key suppliers. Catering Contracts: continue to assess the suitability of Scotland Excel frameworks in order to ensure best value is achieved, along with other priority aims outlined in this guidance such as: Work proactively to identify and support local food and drink suppliers to access the public sector market in Argyll and Bute. Explore opportunities to introduce dynamic procurement opportunities for food and drink where appropriate. Cleaning Contracts: Continue to utilise Scotland Excel frameworks in order to achieve best value and process efficiency. ICT: Continue to use available frameworks and procurement services as required. Corporate: Continue to utilise Scotland Excel and Scottish Procurement frameworks in order to achieve best value and process efficiently. Continue to work with the services to implement CAT C contracts as appropriate. Page 196
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Section 6: Procurement Strategy by Category Page 30 of 60 Back to Contents HR Contracts and Training: Continue working with the service to consider ways of improving and streamlining the central delivery with maximum use of training contracts and frameworks. Work with HR to utilise available frameworks as far as possible. Transport: Continue to provide procurement support to the School and Public Transport and Strategic Transport Teams. Where possible, encourage and support transport operators to explore more sustainable modes of transport including electric vehicles and the use of alternative fuels. Live Argyll: Continue to provide procurement services as required. Education: Increase spend under contract, ensure competitive processes are undertaken where needed, and direct appropriate spend to national or collaborative contracts where appropriate. Fair Work First: Ensure the inclusion of Fair Work First questions covering the five criteria’s for all regulated tenders. Sustainability: Ensure Sustainability and Community Wealth Building are considered at the sourcing strategy stage for all regulated tenders. Longer Term Strategy The longer term strategy for the procurement of goods and services within Corporate & Education over the next 3-5 years includes: Collaboration: Greater engagement with potential partnerships with consideration to more collaborative procurement working, shared services and outsourcing opportunities. Catering and Cleaning: Provide procurement support for Catering and Cleaning development projects. Ensure all procurement practices support the requirements laid out in the current Programme for Government, including forthcoming requirements expected as part of the Good Food Nation bill, the Community Wealth- building bill and the extension of universal free school meals. Explore opportunities for increasing the provision of organic or agro ecologically sourced food and drink across all food and drink contracts. ICT: Annually review overarching ICT Category Strategy. Corporate: Develop an overarching Corporate Category Strategy. Expand the contract and supplier management process. Transport: Annually review the Passenger Transport Category Strategy. Expand the contract and supplier management process. Explore options to expand demand responsive transport services across different areas of Argyll and Bute. Page 197
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Section 6: Procurement Strategy by Category Page 31 of 60 Back to Contents CONSTRUCTION & ENVIRONMENT Scope/Key Spend Areas The Construction & Environment Category consists of the following areas: Construction Consultancy Construction Supplies Building Works & Services Infrastructure Works & Services Environment An analysis of the existing spend profile within the Construction & Environment Category has identified a number of priority areas of focus. These key areas include: Procurement of all goods and low value services (up to £20,000) within Roads and Infrastructure Services routed through the Construction Purchasing Team via dandipurchasing@argyll-bute.gov.uk. Using PECOS, the team promote the use of local and collaborative contracts across the service to achieve maximum savings. In addition, the team will also source non contracted items to achieve best value. Major Projects – Procurement and contract management support will be provided to ongoing and upcoming projects, including the Rothesay Pavilion Regeneration project, Kilmory Business Park and Roads Depots Replacement (Lochgilphead, Islay, Dunoon). Statutory Maintenance Contracts – Providing procurement support for ongoing and upcoming term contract requirements. Rural Growth Deal (construction and infrastructure related themes) – Providing procurement support for both internal procurements and procurements undertaken on behalf of external organisations. Short/Medium Term Strategy The short term strategy for the procurement of works, goods and services within Construction & Environment over the next 2-3 years is: Continue to provide support in the achievement of the Council’s capital programmes. Continue to put in place framework agreements to cover core areas of spend across the Council. Continue to increase volume of Quick Quotes raised via Construction Purchasing Team for the purposes of operation efficiency and achievement of savings. Procurement support will be provided for a Residual Waste procurement to comply with the end of 2025 municipal waste landfill requirements; we anticipate working with West Dunbartonshire Council on a joint procurement exercise for this. Page 198
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Section 6: Procurement Strategy by Category Page 32 of 60 Back to Contents Continue to ensure adequate resource to support Major Projects and Rural Growth Deal programme procurements. Introduction of a short-term 6 month pilot to increase the threshold for Property Services to carry out their own Quick Quotes via PCS (up to £5,000 for Consultancy Services and £10,000 for Works). Introduce a Building Consultancy Services Dynamic Purchasing System to further support SMEs and local contractors in accessing opportunities. Fair Work First: Ensure the inclusion of Fair Work First questions covering the five criteria’s for all regulated tenders. Sustainability: Ensure Sustainability and Community Wealth Building are considered at the sourcing strategy stage for all regulated tenders. Provide support to the HSCP and Council teams with the development of the Place Based Review in Lochgilphead. Statutory Maintenance Term Contracts: The PCCMT is currently working with Property Services to introduce new Term Contracts to cover the Council’s statutory requirements in relation to buildings maintenance. This is an ongoing process with separate unique contracts and specialist suppliers involved. Collaborative frameworks will be utilised where possible. Provide procurement and contract management support for Economic Growth outcomes. Longer Term Strategy The longer term strategy for the procurement of works, goods and services within Construction & Environment over the next 3-5 years includes: Assist Services in increasing their commercial awareness in terms of opportunities on Public Contracts Scotland, subject to availability of adequate resource in the Service. With regards to Waste Management, changes in legislation will bring new requirements for the Council (could also include requirements relating to Waste PPP contract handback in 2026) to be confirmed by the Service. Provide procurement support to assist the Property Services team with increasing levels of contracted statutory maintenance spend from the current levels. Provide continuing procurement and contract management support to the Rural Growth Deal programme over the full 10 year period. Page 199
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Section 6: Procurement Strategy by Category Page 33 of 60 Back to Contents CARE, EARLY YEARS & HOUSING Scope/Key Spend Areas The Care & Housing Category consists of the following areas: Adult Services Children’s Services Housing & Homelessness Services Early Years Aids and Adaptations An analysis of the existing spend profile within the Care & Housing Category has identified key areas of focus. The highest spend within the Care and Housing Category comes from the Health and Social Care Partnership (HSCP). The Integration Joint Board’s (IJBs) Joint Strategic Commissioning Strategy (JSCS) informs the procurement priorities for the HSPC and anticipates the priorities of a National Care Service. Following consultation, the IJB have agreed the following priorities: - Choice and Control & Innovation - Prevention, early intervention and enablement - Living well and active citizenship - Community co-production In addition to this, key market messages have been published as follows: A shift to digital technology and increased use in telecare and telehealth A move to different models of care at home and support services Hospital Avoidance and Prevention Support to unpaid carers Promotion of health enabling and community co-production Sustainability of workforce skills within key sectors of Argyll and Bute Self-directed support Engagement with our communities Accessing transport In addressing these priorities the function of procurement and commissioning may look different. We anticipate a greater focus on equal partnership, community involvement (including supported people) and use of models that support co-production. Page 200
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Section 6: Procurement Strategy by Category Page 34 of 60 Back to Contents While we can’t predict what new services will look like, we can expect that the following will be key areas of focus: Care at Home and Supported Living Services Local contracts for Care at Home Services to older people and Supported Living Services to adults with support needs related to learning disability are in place to 31st January 2024. The HSCP is in the early stages of developing a Care at Home Strategy for Older People; and reviewing the provision of services aimed at other adults, with a particular focus on ensuring contracted support for those with mental health needs. This work will inform models of support including a procurement process that is proportionate and in keeping with strategic and national priorities. Scotland Excel have developed a national contract for delivery of these services. Argyll and Bute Council (on behalf of the IJB) were involved in the development of this contract and are named on the contract, however, are not using it at this stage. This will be considered as part of future sourcing strategy. Responder Services The current contract for Responder Services ends July 2024. The future procurement of this service will be informed by the JSCS and the individual service strategies that have a focus on Technology Enabled Care (TEC), Adults and Older People. Older People’s Care Homes Work continues by Scotland Excel at a national level on the development of a new National Care Home Contract and it is our intention to continue using this. However, we must be aware of the continuing risk that negotiations will fail. In that instance, Argyll and Bute HSCP would require locally negotiated contracts and/or collaborative arrangements with other partnerships. Adult and Children/Young People’s Residential Placements (outside Argyll and Bute) The HSCP is continuing to work towards keeping more young people in Argyll and Bute. This may result in some related procurement activity in the term of this Strategy. Children with Disabilities Support Services and Respite Contracts for support in some areas of Argyll and Bute will come to an end on 31st March 2024. Any future procurement of these services will be aligned with the vision and priorities of the Children and Young People’s Service Plan 2020 -2023 (and any future iterations of the plan). Page 201
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Section 6: Procurement Strategy by Category Page 35 of 60 Back to Contents Community Based Addiction Recovery Services The contract for Community based addiction recovery services end in December 2024. Future procurement will be aligned with the Argyll & Bute Alcohol and Drug Partnership’s (ADP) Alcohol and Drug Strategy and Action Plan 2020 – 2023 and any future iterations. Technology Enabled Care (TEC) While this area is not captured as a key focus in recent spend analysis, a major design change (analogue to digital) will result in a future procurement process. In addition, the general profile of TEC is increasing and this may be reflected in spend and procurement activity over the period of this Strategy. Outside of the HSCP, the following will be key areas of focus: Early Learning and Childcare Services Contracts are in place for the Scottish Government’s policy of delivering 1140 hours of funded childcare to eligible children, this contract is in place to August 2023 with the option to extend for up to 2 further years. The focus is now on ensuring sustainable provision and the agreement of a rate that will reflect national policy priorities and enable payment of the real Living Wage to all workers delivering the funded requirement. Housing Contracts are in place for Tenancy Support Services and Serviced Accommodation for people that are homeless or identified as being at risk of homelessness to 2024, with the option to extend for a further year. The focus during the term of the Strategy will be on contract management. The Housing Service are involved in the development of the HSCPs JSCP and will be a key partner in the design and commissioning of future models of care. Short/Medium Term Strategy The short term strategy for the procurement of goods and services within the Care, Early Years & Housing Category over the next 2-3 years is: Specific Procurements: The Council’s continued participation in the National Care Home contract is expected and recommended. Scotland Excel are now actively involved in the negotiation process with the Convention of Scottish Local Authorities (COSLA) and have successfully negotiated the contract for the year 2023/24. It is expected that from 2024/25 a longer-term arrangement will be negotiated. The risk of failure of negotiations must continue to be monitored. Scotland Excel have contracts in place for Fostering, Care Homes for Adults with Learning Disabilities and Children’s Residential Services – continued use of these is expected. Page 202
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Section 6: Procurement Strategy by Category Page 36 of 60 Back to Contents PCCMT will be involved in the strategic planning work underway for Adult Services, in particular, for those areas that will influence the development of the Care at Home and Supported Living Service contracts. This work will inform the sourcing strategy for these services, including consideration of any Scotland Excel or other collaborative contracts. As stated above, Responder Services contract will come to an end July 2024. Work will therefore commence shortly on the planning/development of a commissioning process for future service provision. The development of a new contract for Community Based Recovery Services is expected to take place to secure services from December 2024, when the current contract ends. TEC – The profile of Technology Enabled Care (with the move from analogue to digital) is increasing, PCCMT will monitor this through attendance at the TEC steering group. General Activity: Continue involvement in the implementation of the JSCS and related work streams. This work will likely prompt reviews of specific service areas, and result in procurement process and/or redesign of contracted services. To comply with the Guidance on the Procurement of Care and Support Services 2016 (Best Practice), making use of the provisions of the Light Touch Regime (LTR), where appropriate, under the Public Contract (Scotland) Regulations 2015. The LTR allows consideration of wider factors when sourcing Health, Social Care and Education services and legitimises their influence in decision making. These wider factors allow procurement activity to take account of the strategic vision of the HSCP, for example, in relation to sustainability; improved outcomes; continuity; choice and affordability. To procure in a way that is in line with and sensitive to the expected national direction from the Scottish Government, the Feeley Review and the forthcoming National Care Service. While we await more information on the implementation of the National Care Service, we will continue to support customers in making best use of the procurement options available, ensuring that sourcing strategies balance the desire for longer term contracts; partnership working and co-production with procurement related risks. To ensure that Fair Work First criteria is implemented in all procurements and reflected in Contract Management activity in line with the guidance in SPPN 6/2021. Sustainability: Ensure Sustainability and Community Wealth Building are considered at the sourcing strategy stage for all regulated tenders. To continue to undertake contract and supplier management activity with key suppliers. To improve communication with customers by developing and promoting guidance and reports in relation to procurement and contract management activity. Page 203
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Section 6: Procurement Strategy by Category Page 37 of 60 Back to Contents To provide general advice to the HSCP in relation to their management and review of Service Level Agreements (SLAs) to help achieve best value. To continue to review the terms and conditions for care services. To work with colleagues in the HSCP to ensure that contracts are in place to maximise the Self-Directed Support (SDS) options as far as possible and to support the HSCP in balancing the risks of choice and control against best value (including procurement regulations). To ensure that suppliers providing services to vulnerable clients manage their health and safety risks appropriately. This will be achieved via proportionate and relevant checks pre-contract award and as part of contract management. To continue to work with customers and involve and guide them in the Contract and Supplier Management process to ensure maximum benefits are realised from the contract. Longer Term Strategy The longer term strategy for the procurement of goods and services within the Care, Early Years & Housing Category over the next 3-5 years includes: Develop and continue to review Commodity Sourcing Strategy coverage for all high value/high risk procurements, ensuring that these strategies compliment National Direction and the strategic vision of customers. Continue active involvement in national activity lead by Scotland Excel and other relevant bodies. Continue to seek innovative solutions for compliant procurement processes for Services to the Person, e.g. flexible frameworks. Continue to provide procurement support advice and assistance to the relevant customers, in order to ensure that they are receiving best value quality services from its suppliers, delivered safely and without unacceptable risks to health. Through appropriate and proportionate procurement and contract management activity, we will contribute to the achievement of our customers’ strategic vision. Page 204
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Section 7: Financial Analysis & KPIs Page 38 of 60 Back to Contents 7.1 The Council’s total procurement spend in 2022/23 on supplies, services and works was £163.1 million, this is broken down by Category in the table below. Table 1: Procurement Spend by Category for 2022/23 Category Total Spend 2022/23 Construction & Environment £80.46m Care, Early Years & Housing £56.49m Corporate & Education £26.19m Total £163.14m 7.2 The following table shows the Council’s spend in more detail by vCode Business Sector, a classification system appended by the Scottish Procurement Information Hub. Table 2: Procurement Spend by vCode Business Sector for 2022/23 vCode Business Sector Total Spend 2022/23 Social Care & Services £50.23m Construction £34.64m Facilities Management £20.34m Waste & Environmental Services £12.47m Travel & Accommodation £7.23m Other Goods & Services* £6.02m ICT £5.56m Utilities & Energy £4.59m Vehicles £3.93m Human Resources £3.10m Transport £2.50m Education £1.84m Financial Services £1.71m Healthcare £1.38m Arts, Sport & Leisure £1.30m Food, Beverage & Catering £1.24m Business Support Services £1.07m Professional Services £1.00m Security Equipment & Services £0.59m Animals & Farming £0.40m Legal £0.39m Marketing & Media £0.38m Data Not Available £0.36m Section 7 – Financial Analysis & KPI’s Page 205
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Section 7: Financial Analysis & KPIs Page 39 of 60 Back to Contents Table 2: Procurement Spend by vCode Business Sector for 2022/23 /contd vCode Business Sector Total Spend 2022/23 Public Sector Bodies £0.30m Manufacturing & Machinery £0.28m Stationery & Office Products £0.15m Clothing £0.05m Personal Care £0.04m Laboratory £0.02m Retail & Wholesale £0.01m Charitable & Religious Activity £0.01m Total £163.14m 7.3 The top 20 suppliers to the Council account for 46.9% of the procurement spend. The following table shows the top suppliers and spend for the year 2022/23. Table 3: Spend with Top 20 Suppliers in 2022/23 Supplier Name Total Spend 2022/23 ABC Schools Ltd £16.27m Renewi Argyll & Bute Ltd £8.95m Carr-Gomm Society Ltd £6.29m Hub North Scotland Ltd £5.69m West Coast Motor Services Co. £5.36m Enable £4.63m Dawson Wam Ltd £3.87m Heron Bros Ltd £3.70m Hillhouse Quarry Company Ltd £2.99m BCA Insulation £2.29m HC One Ltd £2.12m DCF Joiners & Building Services Ltd £1.82m Affinity Trust £1.76m Key Housing Association Ltd £1.72m Barr Environmental Ltd £1.58m Carers Direct Ltd £1.52m Mckenzie Care Homes Ltd £1.50m Highland Fuels Ltd £1.47m Zurich Insurance Company £1.47m Kiely Bros Ltd £1.46m Total Spend with Top 20 Suppliers £76.46m Page 206
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Section 7: Financial Analysis & KPIs Page 40 of 60 Back to Contents 7.4 In 2022/23, spend with SMEs accounted for 61% of procurement spend (where supplier size could be determined). The chart below shows the breakdown of spend with Small, Medium and Large companies for 2022/23. 7.5 Key Performance Indicators: Key Performance Indicators Provisional 2022/25 Target Procurement spend with contracted suppliers (%) 90% Contracts awarded to SMEs (% of contracts awarded) 76% Local suppliers bidding for business with the Council (% of bids received) 20% Tenders won by a local supplier where a local supplier has placed a bid (%) 20% Increase the number of community benefits that are delivered through contracts we award locally N/A Invoices paid within 30 days (%) 95.5% Page 207
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Section 8: Implementation, Reviewing & Reporting Page 41 of 60 Back to Contents 8.1 IMPLEMENTATION 8.1.1 Consultation The Council will undertake relevant and proportionate consultation and engagement as part of the preparation of this Procurement Strategy. This will help to ensure that our approach and strategy takes account of stakeholders’ views and that stakeholders have the opportunity to engage and contribute to the development of the Strategy. This will allow us to gain a better understanding of the needs of Argyll and Bute and to tailor our Strategy to reflect those needs. The key stakeholder groups identified for inclusion in this consultation are: Argyll and Bute Council Employees Argyll and Bute Councillors MP and Local MSPs Key Suppliers Community Planning Partners Other interested parties The general public The full details of our consultation are included within a report to the Council’s Procurement Board; this covers what will be involved in the consultation, and the inclusion of feedback to the final Strategy. 8.1.2 Approval of Strategy The Procurement Strategy will be approved in line with the Council’s standard process. After the consultation is complete, the draft Strategy will be finalised and sent for approval by the Departmental Management Team, the Executive Leadership Team and the Policy and Resources Committee. 8.1.3 Publication of Strategy The Council will publish this Procurement Strategy on our website, and will notify Scottish Ministers of the publication of our Strategy. 8.2 REVIEWING The Council will review this Procurement Strategy annually. This will help to ensure that we maintain alignment of our procurement activity with our broader priorities and will allow us to revise our Strategy where necessary. Section 8 – Implementation, Reviewing & Reporting Page 208
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Section 8: Implementation, Reviewing & Reporting Page 42 of 60 Back to Contents 8.3 REPORTING The Council will, as soon as reasonably practicable following the end of the financial year, prepare an Annual Procurement Report which will include: A summary of all regulated procurements completed in the year. A review of whether these procurements complied with this Procurement Strategy. A statement detailing how it is intended that future compliance will be achieved where any procurements were found not to have been carried out in accordance with this Procurement Strategy. A summary of any community benefit requirements imposed as part of a regulated procurement that was completed during the year. A summary of steps taken to facilitate the involvement of supported businesses in regulated procurements completed during the year. A summary of anticipated regulated procurements expected to commence in the next two financial years. Anticipated future procurements. Any other information as specified by the Scottish Ministers. Page 209
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Section 9: Policies, Tools & Procedures Page 43 of 60 Back to Contents National Policies: Equality Act 2010 Equality Act 2010 (Specific Duties) (Scotland) Regulations 2012 Organisation for Economic Co-Operation and Development Procurement and Commercial Improvement Programme (PCIP) – Overview Procurement Journey Procurement Reform Update (SPPN 1/2016) Public Contracts Scotland Public Contracts Scotland Tender Scottish Model of Procurement Scottish Procurement Information Hub Scottish Sustainable Procurement Duty Workforce Matters (SPPN 1/2015) Local Policies: Community Benefits Clauses in Procurement Guide Corporate Plan 2023-2027 Council Constitution Economic Strategy 2019-2023 Equality and Fairness Health and Safety Policy Sustainable Procurement Policy 2022/25 Section 9 – Policies, Tools & Procedures Page 210
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Section 9: Policies, Tools & Procedures Page 44 of 60 Back to Contents Tools The Council has embedded various tools within its Strategic Procurement Process to assist and ensure best value is achieved in its procurement activity. Utilisation of the tools also supports compliance with the Sustainable Procurement Duty. The key tools utilised by procurement are as follows: Scottish Government Procurement Journey Argyll and Bute Council’s Procurement Manual Argyll and Bute Council’s Supplementary Procurement Guidance Argyll and Bute Council’s procurement templates catalogue. Procurement Team Contract workplan Scottish Government Sustainable Procurement Tools o Prioritisation Tool o Sustainability Test o Flexible Framework Assessment Tool o Life Cycle Impact Mapping Contract and Supplier Management Framework Tools o Contract Management Prioritisation Matrix o Community Benefits online page Procedures The Council’s Standing Orders Relating to Contracts (Standing Orders), the Scottish Government Procurement Journey and the Council’s Corporate Procurement Manual apply to all contracts made by or on behalf of the Council for the execution of works, the supply of goods and the provision of services. The Standing Orders are subject to the overriding provisions of United Kingdom and Scottish legislation. They are also subject to any UK Government and Scottish Government guidance on public procurement that may be issued from time to time. The Standing Orders shall not apply to any contracts made on behalf of the Council by Scottish Procurement, Scotland Excel or any other central purchasing body with whom the Council has made arrangements for the award of works, supplies or services contracts on its behalf, save in respect of the reporting requirements prescribed in. Page 211
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Section 9: Policies, Tools & Procedures Page 45 of 60 Back to Contents The Council operates its service delivery programme against a defined set of policies and strategies. As well as conforming to legislative aspects, the Council maintains awareness of and an input into the broader aspects of policy making in public services and community development - often working in partnership with Government, other public bodies and the private sector. The majority of procurement activities will continue to support and promote relevant council strategies and policies of which the majority are embedded within existing procurement processes and procedures. Current key strategies, policies and procedures are set out in Plans and Policy | Argyll and Bute Council (argyll-bute.gov.uk). Page 212
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Section 10: Glossary Page 46 of 60 Back to Contents Term Description Annual Procurement Report The Procurement Reform (Scotland) Act 2014 requires all contracting authorities obliged to publish a Procurement Strategy, to publish an Annual Procurement Report on its regulated procurement activities as soon as reasonably practicable after the end of its financial year. Award A decision to accept a tenderer’s offer to supply/provide specified goods/services/works according to agreed terms and conditions, thereby creating a legally binding contract. Best Value The duty under the Local Government Act in Scotland 2003 to secure continuous improvement in the economy, efficiency and effectiveness with which they exercise their functions. BPIs Best Practice Indicators - A common, core set of National Procurement Best Practice Indicators (BPIs) were developed by the Scottish Government and designed to be applicable and useful to PCCMTs in all parts of the public sector in Scotland. Brexit An abbreviation for "British exit," referring to the UK's decision in a June 23, 2016 referendum to leave the European Union (EU). CAT C At a national procurement level, Category C are local contracts for use by individual public bodies. Category A collection of commodities or services sourced from the same or similar supply base, which meet a similar consumer need, or which are inter-related or substitutable. Category Management Procurement approach used within Argyll and Bute Council to manage categories of spend to increase efficiencies and expertise. CDM Regulations Construction (Design and Management) Regulations 2015 Circular Economy A system where materials never become waste and nature is regenerated. In a circular economy, products and materials are kept in circulation through processes like maintenance, reuse, refurbishment, remanufacture, recycling, and composting. Collaboration Cooperative joint working with another public sector organisation. Commodity Sourcing Strategy A document that shows the preparatory thinking that is done about a procurement process, including sustainability considerations, stakeholders to be involved, risks etc. Section 10 – Glossary Page 213
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Section 10: Glossary Page 47 of 60 Back to Contents Term Description Community Benefits Clauses Community Benefits Clauses provide a means of achieving sustainability in public contracts. Contract Management The process of monitoring the performance of a supplier to contract. Contract Notice Advert to invite applicants to express interest and apply to tender, or to be pre-qualified. Contractor The provider of any supplies, services or works under contract. Or, in the context of works, at any stage of the process. COSLA Convention of Scottish Local Authorities - a Councillor-led, cross- party organisation who champion Councils’ work to secure the resources and powers they need. They work on Councils' behalf to focus on the challenges and opportunities they face, and to engage positively with governments and others on policy, funding and legislation. CSS Commodity Sourcing Strategy - A document that shows the preparatory thinking that is done about a procurement process, including sustainability considerations, stakeholders to be involved, risks etc. Demand Management To take costs out of an organisation by addressing the drivers for spend, aligning spend to business need and eliminating unnecessary consumption. DMT Departmental Management Team within Argyll and Bute Council DPS Dynamic Purchasing System - Electronic system that can be established to purchase goods and services, similar to a framework agreement, but where new suppliers can join at any time. ELT Executive Leadership Team within Argyll and Bute Council Equality Duty Compliance with the terms of the Equality Act 2010 and any guidance provided by the Scottish Ministers for local authorities to comply with the Public Sector Equality Duties. Fair Work First Fair Work First is the Scottish Government's flagship policy for driving high quality and fair work across the labour market in Scotland by applying fair work criteria to grants, other funding and contracts being awarded by and across the public sector, where it is relevant to do so. Page 214
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Section 10: Glossary Page 48 of 60 Back to Contents Term Description Framework Agreements An agreement or other arrangement between one or more contracting authorities and one or more economic operators which establishes the terms (in particular, the terms as to price and, where appropriate, quantity) under which the economic operator will enter into one or more contracts with a contracting authority in the period during which the framework agreement applies. HSCP Health and Social Care Partnership, also referred to as the Argyll and Bute Integrated Joint Board being the Integration Joint Board established by Order under Section 9 of Public Bodies (Joint Working) (Scotland) Act 2014. ICT Information and Communications Technology IJB Integration Joint Board KPIs Key Performance Indicators. Measurable value that demonstrates how effectively the Council is carrying out procurements. LTR Light Touch Regime - Reference to the process for the award of a public contract for social and other specific services. MEAT Most Economically Advantageous Tender - Taking account of criteria that reflect qualitative, technical and sustainable aspects of the tender submission as well as price when reaching an award decision. Net Zero No longer adding to the total amount of greenhouse gases in the atmosphere. Greenhouse gases include carbon dioxide (CO2) and methane. CO2 is released when oil, gas and coal are burned in homes, factories and to power transport. Methane is produced through farming and landfill. These gases increase global temperatures by trapping the sun's energy. Notice Advert PCCMT Procurement, Commercial and Contract Management Team within Argyll and Bute Council PCIP Procurement Commercial Improvement Programme Assessment Annual assessment of public sector organisations that focuses on the policies and procedures driving procurement performance and the results they deliver. Page 215
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Section 10: Glossary Page 49 of 60 Back to Contents Term Description PCS Public Contracts Scotland - The national advertising portal used to advertise all Scottish Government goods, services or works contract opportunities. PCS-T Public Contracts Scotland-Tender - The national eTendering system. PECOS Professional Electronic Commerce Online System – cloud based purchase to pay system used by Argyll and Bute Council. PIN Prior Information Notice - Early notices on PCS to advise of the intention to advertise later. PPP Public Private Partnership Is a partnership between local government and private companies to provide services to the community. Procurement Exercise Full end to end procurement exercise documentation from strategy development to contract and supplier management. Procurement Function The business management function that ensures identification, sourcing, access and management of the external resources that an organisation needs or may need to fulfil its strategic objectives. Procurement Journey Revised public procurement toolkit with guidance and templates on the procurement process or Construction manual when appropriate. The Procurement Journey will be enhanced on an ongoing basis with feedback from users and any other identified good practice guidance and tools, where appropriate, to ensure a standardised approach to the supply base. Procurement Manual Internal Argyll and Bute Council operational procurement guide. Procurement Strategy The Procurement Reform (Scotland) Act 2014 requires contracting authorities with significant procurement expenditure in the next financial year to publish a procurement strategy setting out how they intend to carry out regulated procurements, or review the current strategy and make appropriate revisions. P2P Purchase to Pay Process - Entire supply chain process, from goods receipt to payment process. Quick Quote Procurement method for lower value tenders, where the Invitation to Quote/Invitation to Tender is sent to a set distribution list of suppliers rather than being publically advertised. Page 216
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Section 10: Glossary Page 50 of 60 Back to Contents Term Description Scotland Excel Scotland Excel is the Centre of Procurement Expertise for Scotland's local government sector. Scottish Procurement Directorate within the Scottish Government, carrying out procurements on behalf of the Scottish public sector. SDS Self-Directed Support Services/ Supplies/ Works A public service contract is a contract having as its object the provision of services. A public supply contract is a contract having as its object the purchase, lease, rental or hire purchase with or without an option to buy, of products. A public works contract is a contract having as its object a building or civil engineering project or piece of work. SLA Service Level Agreement – A commitment between a service provider and a client. SMEs Small and Medium Enterprises - The category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro and/or an annual balance sheet total not exceeding 43 million euro. Social Enterprises Businesses whose primary objectives are social or “more than profit”. Specifications The part of the invitation to quote or invitation to tender which details the nature and quality of the goods, services or works. Stakeholder Any person or group who has a vested interest in the success of the procurement activity, i.e. either provides services to it, or receives services from it. Standing Orders The set of rules governing the procurement and financial regulations with which the Council must comply, in terms of the Local Government Scotland Act 1973. Supplier An entity who supplies goods or services Supplier Development Programme A business support initiative using training and information to improve the competitiveness of local businesses. Supply Chain All activities, resources, products etc. involved in creating and moving a product or service from the supplier to the procurer. Page 217
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Section 10: Glossary Page 51 of 60 Back to Contents Term Description Supported Business A supported business’ primary aim is the social and professional integration of disabled or disadvantaged persons. At least 30 per cent of the employees of those businesses should be disabled or disadvantaged. Sustainability In relation to procurement, sustainability involves understanding the potential environmental, social and economic impacts that are a result of purchasing decisions. Tender An offer, or bid, by a tenderer in response to an invitation to tender (ITT) or a mini-tender in a framework agreement. Third Sector The third sector includes charities, social enterprises and voluntary groups; delivers essential services, helps to improve people's wellbeing and contributes to economic growth. Value for Money An economic assessment by the public sector as to whether a project represents value for money; the optimum combination of cost and quality to provide the required service. Whole Life Costs The costs of acquiring goods or services (including consultancy, design and construction costs, and equipment), the costs of operating it and the costs of maintaining it over its whole life through to its disposal – that is, the total ownership costs. These costs include internal resources and overheads. Page 218
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Section 11: Strategy Ownership and Contact Details Page 52 of 60 Back to Contents 11.1 The Argyll and Bute Council Procurement, Commercial and Contract Management Team are part of the Legal and Regulatory Support Services team which sits within the Customer Services Directorate. 11.2 The Procurement, Commercial and Contract Management Team works with the Council’s Services and suppliers to develop contracts and procedures to deliver Best Value. 11.3 The team is responsible for the procurement of works, goods and services for all Council departments; and for developing procurement processes, procedures, strategies and policies in line with national best practice. 11.4 If you have any queries in relation to this strategy, please contact: Anne MacColl-Smith, Manager, Procurement, Commercial and Contract Management Team Procurement@argyll-bute.gov.uk Section 11 – Strategy Ownership & Contact Details Page 219
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Section 12: Sustainable Procurement Policy 2022/25 Page 53 of 60 Back to Contents Appendix 1 Section 12 – Appendix 1 Argyll and Bute Council SUSTAINABLE PROCUREMENT POLICY 2022/25 Annual Review 2024/2025 Page 220
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Section 12: Sustainable Procurement Policy 2022/25 Page 54 of 60 Back to Contents 1 INTRODUCTION 1.1 Sustainable procurement is defined in the Scottish Government’s “Sustainable Procurement Action Plan for Scotland” (2009) as the process whereby organisations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole life basis and generates benefits not only to the organisation, but also to society, the economy and the environment. 1.2 In recent years, Sustainable Procurement has become an increasingly important item on the Scottish political agenda. Procuring sustainably involves understanding the potential environmental, social and economic impacts that are a result of our purchasing decisions. Argyll and Bute Council’s Sustainable Procurement Policy sets out the direction for the Council and builds on existing sustainability practice. The Policy covers the three strands of sustainability: environmental, social and economic and aims to meet the substantial challenges of balancing the complexities of sustainable procurement within today’s economic climate and continued drive for best value. The Policy also supports the delivery of the Council’s Decarbonisation Plan. 1.3 Argyll & Bute Council is one of the region’s major public money spenders with £163.1 million spent in 2022/23, and resolves to embed progressive procurement practices by developing local supply chains of businesses likely to support local employment and keep wealth within communities. Further, Argyll & Bute Council will make its financial power work for local places, working collaboratively to increase flows of investment within local economies by harnessing and recirculating the wealth that exists. 1.4 This Sustainable Procurement Policy has been developed to help the Council deliver its key strategic objectives and to meet a range of duties relating to sustainable development and climate change. This policy expands on the commitment to sustainable procurement which is set out in the Council’s Procurement Strategy 2022/25. It is intended that it will apply to all contracts for works, goods or services in which the Council has an interest. From writing sourcing strategies to evaluating bids, the Council should seek to integrate relevant sustainability issues into its everyday procurement activity. 2 POLICY STATEMENT 2.1 The aim of this Sustainable Procurement Policy is to ensure that Argyll and Bute Council embeds the principles of sustainability within its procurement activities to ensure that only products and services which can be described as ‘best value’ are selected and that in all cases a balanced consideration of economic, social, and environmental impacts are undertaken throughout the procurement process. 2.2 This Policy also aims to ensure that Argyll and Bute Council’s employees, contractors and suppliers are aware of the Council’s commitment to long-term economic, social, and environmental sustainability. Page 221
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Section 12: Sustainable Procurement Policy 2022/25 Page 55 of 60 Back to Contents 2.3 Adoption of this policy shall contribute to the Council’s Best Value obligations, towards the Procurement & Commercial Improvement Programme (PCIP), Best Practice Indicators (BPIs) and towards Climate Change targets. 2.4 Sustainable Procurement also contributes to the Scottish Government’s seven Purpose Targets of Economic Growth, Productivity, Participation, Population, Solidarity, Cohesion and Sustainability. 2.5 Council Commitment The Council will strive, where appropriate and possible, to ensure that decisions on the procurement of resources and/or in relation to the provision of grant funding or financial assistance to any organisation or individual are undertaken in line with our sustainability commitments and that commercial relationships are formed and nurtured with supplier and partnering organisations who share our values on sustainability. 3 PUBLIC SECTOR PROCUREMENT LANDSCAPE AND SUSTAINABLE PROCUREMENT There are various pieces of legislation/Scottish Government tools/best practice which impact on the Council’s Sustainable Procurement Policy: Revised Flexible Framework The Public Contracts (Scotland) Regulations 2015 Procurement Reform (Scotland) Act 2014 (including the Sustainable Procurement Duty) Waste (Scotland) Regulations 2012 Equality Act 2010 and the Equality Act 2010 (Specific Duties) (Scotland) Regulations 2012 Climate Change (Scotland) Act 2009; the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019; and the Climate Change (Duties of Public Bodies: Reporting Requirements) (Scotland) Amendment Order 2020 Local Government in Scotland Act 2003 4 LOCAL LANDSCAPE AND SUSTAINABLE PROCUREMENT There are also various internal policy documents and strategies which impact on the Council’s Sustainable Procurement Policy: Argyll and Bute Outcome Improvement Plan 2013-2023 Argyll and Bute Council Corporate Plan for 2023-2027 Argyll and Bute Council Procurement Strategy 2022-2025 Review 2023/24 Argyll and Bute Council Procurement Manual Argyll and Bute Council Community Benefits in Procurement Guide Argyll and Bute Council Decarbonisation Plan 2021 Page 222
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Section 12: Sustainable Procurement Policy 2022/25 Page 56 of 60 Back to Contents 5 SUSTAINABLE PROCUREMENT METHODOLOGY 5.1 Priorities The Council’s Sustainable Procurement Policy will give guidance and direction, whilst remaining flexible to change as the Council continues to embed sustainability into the procurement process. This policy outlines the key sustainable procurement commitments which will be applied to all procurement activity carried out by the Council. Compliance with this policy and other linked policies set out in this document is mandatory. This will be achieved by a focus on the following priorities within the structure of the revised Flexible Framework: 1 People a) We will use organisational development opportunities, and e- learning to share knowledge and ensure annual refresher training on the latest sustainable procurement principles for key procurement staff, to meet any knowledge gaps. b) We will establish clear leadership to drive the embedding and continuous improvement of sustainable procurement within the Council, through having a Sustainable Procurement Champion within the Council. c) We will publicise our commitment and successes in Sustainable Procurement. 2 Objectives, Strategy & Communications a) We will carry out sustainable procurement whilst complying with national procurement regulations that protect and encourage open and transparent public procurement. b) We will ensure our Sustainable Procurement Policy continues to meet all external requirements, as well as complementing the Council’s internal Strategies. c) We will ensure relevant communications strategies are developed and actioned as required, in relation to Sustainable Procurement outcomes. d) We will communicate this policy and accompanying guidance to all Council staff and elected members. Page 223
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Section 12: Sustainable Procurement Policy 2022/25 Page 57 of 60 Back to Contents 3 Process a) We will consider sustainability issues in relation to the economic, social and environmental wellbeing of our area throughout the procurement process, including within strategy documents and contract conditions and specifications. b) We will use Community Benefits Clauses, where appropriate, in line with the Council’s Community Benefits Clauses in Procurement Guide, reporting on achievements to the Council’s Procurement Board on a quarterly basis. c) In relation to economic considerations, our priorities will be: To use mandatory sub-contracting clauses in all proportionate and relevant contracts; To lot contracts where appropriate to encourage small and medium size organisations to bid, and to ensure that tender documents are proportional to the requirement to remove unnecessary obstacles. d) In relation to social considerations, our priorities will be: To ensure there is no intentional discrimination against specific groups of people when undertaking procurements - Equalities and Diversity considerations will be embedded throughout the procurement process; To ensure that our contract terms require suppliers to support the health, safety, welfare and rights of their employees and supply chain – ensuring that the Council does not support human trafficking or modern slavery; To promote fair trade options throughout the Council; To promote the use of Supported Businesses, where their prices and capacity to deliver is comparable to the rest of the market. e) In relation to environmental considerations, our priorities will be: To ensure that our procurements minimise our contribution to climate change and support goods, services and works that are well-adapted to the consequences of a changing climate; To ensure that our procurements are necessary – where appropriate re-using, repairing or refurbishing existing goods; To specify fresh, seasonal, nutritious and, where possible, organic food, and to not knowingly purchase genetically modified food or food with genetically modified ingredients; Page 224
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Section 12: Sustainable Procurement Policy 2022/25 Page 58 of 60 Back to Contents 3 (e)/contd To specify minimum packaging, reusable packaging and packaging take-back; To provide procurement support to any strategic decisions taken by the Council in relation to the usage of Single Use Plastic products and their recyclability; To minimise any negative impacts of our procurements on biodiversity; To use recycled paper throughout the Council where there are no compatibility issues with existing equipment; To consider animal welfare when procuring and, wherever possible, to not purchase goods developed using animal testing. 4 Engaging Stakeholders a) We will engage with our suppliers and stakeholders to remove barriers to participation in procurement and maximise impact of sustainable opportunities. b) We will support local and regional small and medium sized enterprises, voluntary and community groups, third sector organisations, social enterprises, charities and cooperatives, businesses involving minority individuals and groups, and individuals and groups with protected characteristics, to participate in procurement opportunities. c) Where appropriate, we will consult with the people whose needs we aim to meet through our procurement to ensure that we procure goods, services and works that actually meet their needs. d) We will work with suppliers to educate them on sustainable procurement and our policy, to encourage them to use more sustainable goods, processes and working practices in their own business operations and encourage them to engage in sustainable procurement activities within their own supply chain. e) We will consult with stakeholders, including suppliers, third sector agencies and social enterprises, to ensure views are considered on sustainable outcomes sought. Page 225
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Section 12: Sustainable Procurement Policy 2022/25 Page 59 of 60 Back to Contents 5 Monitoring & Reporting a) The Council’s ongoing programme of reviewing and improving our procurement processes will seek to ensure they remain transparent and open to the whole of the supplier community. b) We will ensure suppliers comply with their commitments to the sustainability criteria within our specifications and their tender submissions by building in proportionate, effective monitoring and management into contract arrangements. c) We will measure and report on our progress in embedding and continuously improving sustainable procurement and its contribution to delivering sustainable development annually. d) We will continue to ensure that reporting requirements relating to Sustainable Procurement are met, including Climate Change Reporting requirements, Equality reporting requirements, and internal reporting of Community Benefits achieved. e) We will continue to self-assess the Council’s progress against each theme of the Flexible Framework annually, and report on our progress. 5.2 Implementation: 5.2.1 All Services of the Council will be expected to support the implementation of this Policy. 5.2.2 To ensure the successful implementation of this policy, all procurement staff will receive training on the contents. 5.3 Monitoring: 5.3.1 All progress against the stated priorities within this Policy will be reported on an annual basis. 5.4 Review: 5.4.1 This Policy will be reviewed by the Procurement, Commercial and Contract Management Team annually to ensure that it remains up to date in terms of any relevant new legislation or guidance, and to ensure that it continues to deal with the issues it was designed to address. 5.4.2 The Council will ensure that when the Policy is reviewed, key stakeholders are consulted by seeking their views on the content of the policy. Page 226
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Section 12: Sustainable Procurement Policy 2022/25 Page 60 of 60 Back to Contents 6 SUMMARY Argyll and Bute Council is committed to the ongoing development and delivery of sustainable procurement for all three strands of sustainability: environmental, social and economic. By adopting the approach detailed above, this Sustainable Procurement Policy will help deliver local and national objectives which, in turn ensures a more sustainable outcome to our procurement activity. For Further information please contact: Elaine Appleby - Sustainability Lead Officer Procurement, Commercial and Contract Management Team Elaine.appleby@argyll-bute.gov.uk Page 227
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ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE DEVELOPMENT AND ECONOMIC GROWTH 7 DECEMBER 2023 CONSERVATION AREA REGENERATION SCHEME (CARS) PROJECTS – 2-4 AND 6-10 ARGYLL STREET, LOCHGILPHEAD 1.0 EXECUTIVE SUMMARY 1.1 The Lochgilphead Conservation Area Regeneration Scheme (CARS) is a grant programme focussing on the regeneration of historical buildings as well as traditional skills training and community engagement. Lochgilphead CARS is jointly funded by, Historic Environment Scotland and Argyll and Bute Council together with contributions from building owners. 1.2 Argyll and Bute Council has recognised a need for greater economic investment and regeneration activities within town centres including Lochgilphead. The proposed works align to the objectives set by the Executive Leadership Team to reduce the number of properties within town centres falling into disrepair. 1.3 2-4 Argyll Street and 6-10 Argyll Street are the final two priority buildings for Lochgilphead CARS. Both buildings are located in the heart of the Lochgilphead Conservation Area overlooking Argyll Street/Colchester Square. 1.4 Lochgilphead CARS and Housing Services staff have been working with the owners of these properties since 2020. Delays due to COVID and ownership issues have meant the original projected costs have escalated above the remaining CARS budget by a combined total of £137,271.46. The Private Sector Housing Grant (PSHG) budget for 2023/24 is well within budget, and providing the gap funding to facilitate this project aligns with the key aims of the PSHG to extend the life of capital assets. 1.5 This request for additional PSHG for these two priority buildings is not linked to the recent award of Place Based Investment (PBI) funding for Lochgilphead CARS. The PBI funding has been allocated for shopfront improvements and high level amenity works including repainting front elevations. In respect of the high level amenity works, this will be targeted at buildings that are not eligible for CARS grant funding. Page 229 Agenda Item 8
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RECOMMENDATIONS It is recommended that Members of the Policy and Resources Committee consider and approve the utilisation of Private Sector Housing Grant (PSHG) to award an additional £137,271.46 grant to the 2-4 Argyll Street and 6-10 Argyll Street Lochgilphead CARS projects, thus providing essential gap funding to facilitate the essential repair and conservation of these buildings. Page 230
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ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE DEVELOPMENT AND ECONOMIC GROWTH 7 DECEMBER 2023 CONSERVATION AREA REGENERATION SCHEME (CARS) PROJECTS – 2-4 AND 6-10 ARGYLL STREET, LOCHGILPHEAD 2.0 INTRODUCTION 2.1 This report outlines the gap funding that exists in the final two priority buildings of the Lochgilphead Conservation Area Regeneration Scheme (CARS). The CARS is funded by Historic Environment Scotland and Argyll and Bute Council with contributions from building owners. The report requests utilisation of an additional £137,271.46 grant funding from the PSHG budget to cover that gap and facilitate these two key projects. 3.0 RECOMMENDATIONS 3.1 It is recommended that Members of the Policy and Resources Committee consider and approve the utilisation of Private Sector Housing Grant (PSHG) to award an additional £137,271.46 grant to the 2-4 Argyll Street and 6-10 Argyll Street Lochgilphead CARS projects, thus providing essential gap funding to facilitate the essential repair and conservation of these buildings. 4.0 DETAIL 4.1 2-4 Argyll Street and 6-10 Argyll Street are two adjoining tenement buildings occupying a key location in Lochgilphead town centre. Both buildings comprise of two storeys of residential accommodation over fully commercial ground floors that are currently occupied. These are the final two priority building projects for Lochgilphead CARS. 4.2 The general fabric of both buildings is in a very poor condition and both are suffering from water penetration issues. Photographs are included at Appendix 1. There is damp ingress in the attic space of both buildings and also in the top floor flats. This is having a negative impact on the occupiers quality of life and the Page 231
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buildings are detracting from the townscape and character of the conservation area. 4.3 The proposed scope of work for both buildings includes; slated roof works, associated timber repairs, lead works, rainwater goods, stone works and renderworks. All works are in line with HES’s advisory standards of repair. 4.4 The owners of both buildings formed Owners Associations to enable them to work together and to repair and maintain their buildings. Both Owners Associations have opened bank accounts to deal with all financial transactions. With support from Housing Services, both Owners Associations commissioned a conservation accredited Design Team to carry out Tenement Condition Surveys. Following the survey works, the Design Team then produced detailed Tenement Condition Reports for each building, together with Cost Plans outlining the likely cost of the works. 4.5 Lochgilphead CARS and Housing Services staff have been working with the owners of these properties since 2020. Delays due to COVID and ownership have meant the original projected costs (combined) have escalated above the remaining CARS budget by £137,271.46. The Private Sector Housing Grant (PSHG) budget for 2023/24 is well within budget, and providing the gap funding to facilitate this project aligns with the key aims of the PSHG to extend the life of capital assets. 4.6 Total project costs including all construction costs and design fees are based on the Tender Reports (17 November 2023) from the Design Team. See below: 2-4 Argyll Street: Total project costs £388,071.66 Total CARS grant available from HES and A&B Council £221,933.12 The current eligible PSHG £ 39,600.00 Total owners contributions £ 50,500.00 Shortfall £ 76,038.54 6-10 Argyll Street: Total project costs £336,503.72 Total CARS grant available from HES and A&B Council £175,750.80 The current eligible PSHG £ 49,520.00 Total owners contributions £ 50,000.00 Shortfall £ 61,232.92 Total Shortfall £137,271.46 Page 232
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4.7 The total shortfall is £137,271.46. The proposal is to utilise additional grant funding from PSHG to fill this gap. PSHG should be spent on capital projects such as; adding value to an asset, extending the life of an asset, or acquiring a new asset. The proposed works described in this report meet the finance parameters for PSHG spend. Although the PSHG grant funding is larger than usual it will fall well within the available PSHG budget remaining for this financial year which would otherwise remain unspent, and will facilitate the completion of these two key projects within the Lochgilphead CARS. 5.0 CONCLUSION 5.1 The additional funds proposed would safeguard the fabric of two historic buildings, ensuring the continued use of 3 commercial units and 8 residential units. 5.2 As part of the development of these 2 projects, the owners are now working closer together and Owners Associations have been formed for both buildings. Tenement Condition Surveys have been carried out for both buildings and the associated Tenement Condition Reports provide the Owners Associations with Maintenance Schedules, allowing them to plan for future management and maintenance of their properties. 5.3 These projects cannot go forward without the additional funding, and facilitating both from within the otherwise unspent PSHG budget will allow the completion of the last two Lochgilphead CARS priority buildings. 6.0 IMPLICATIONS 6.1 Policy – The Outcome Improvement Plan, Economic Strategy and Local Development Plan support town centre regeneration and a diverse and thriving economy. 6.2 Financial – The proposed use of PSHG grant funding falls within the criteria for use of PSHG and will appropriately utilise capital budget which will otherwise remain unspent in this financial year. 6.3 Legal – Third party grant contracts will be issued to the private building owners. 6.4 HR - A dedicated project officer is in post for the duration of the Lochgilphead CARS project. Staff salaries are included in the project budget. 6.5 Fairer Scotland Duty - 6.5.1 Equalities - protected characteristics – None. 6.5.2 Socio-economic Duty – None. 6.5.3 Islands – None. 6.6 Climate Change - Extremes of weather caused by climate change will continue to put buildings under pressure. These projects help property owners undertake large scale building repair projects under the supervision of Page 233
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conservation accredited architects which ensures they are future proofed against climate change, using traditional building materials. 6.7 Risk – That grant schemes are oversubscribed or that projects run over time or budget. These risks will be carefully monitored and mitigation measures introduced on a case-by-case basis. 6.8 Customer Service – The council is responsible for administering the CARS grants on behalf of HES and for ensuring due diligence in the performance of its duties. Kirsty Flanagan Executive Director with responsibility for Development and Economic Growth Councillor Robin Currie, Policy Lead for Strategic Development November 2023 For further information contact: James Lafferty: Lochgilphead CARS Project Officer, james.lafferty@argyll-bute.gov.uk Flora Lamont: Team Lead – Housing Operations flora.lamont@argyll-bute.gov.uk APPENDICES Appendix 1: Photographs of Argyll Street properties Page 234
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APPENDICES Appendix 1: Photographs 2 – 4 Argyll St, Lochgilphead 6 – 10 Argyll St, Lochgilphead 2 – 10 Argyll St, Lochgilphead (Aug 23) Page 235
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NATURE RESTORATION FUND – SPEND OPTIONS 1.0 EXECUTIVE SUMMARY 1.1 In July 2021 the Scottish Government launched the Nature Restoration Fund, which provided £10 million in the financial year for projects addressing biodiversity loss and climate change, half of which was delivered via Local Authorities. 1.2 The Nature Restoration Fund aims to support large-scale, multi-year, multi- partner projects, which deliver transformative change to drive forward nature recovery. 1.3 Following on from the Policy and Resources Committee in October 2023, officers sought suggestions from Elected Members in relation to projects relating to Nature Restoration. Appendix 1 of this report sets out the projects submitted by Elected Members, and Appendix 2 provides details of the projects which officers recommend be taken forward. 1.4 The Scottish Government have a further fund available to Local Authorities and Scotland’s National Parks for local nature restoration projects. This is a bidding process which is open to the Council, and is also open to projects that help Scotland's species, woodlands, rivers and seas back on the road to recovery. 2.0 RECOMMENDATIONS 2.1 It is recommended that Policy and Resources Committee:- a) Note the remaining allocation of Nature Restoration Funding; b) Note the suggestions received by Elected Members in Appendix 1; c) Agree to the recommended projects as set out in Appendix 2 of this report. ARGYLL AND BUTE COUNCIL POLICY AND RESOURCES COMMITTEE DEVELOPMENT AND ECONOMIC GROWTH ROAD AND INFRASTRUCTURE COMMERCIAL SERVICES DECEMBER 2023 Page 237 Agenda Item 9
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3.0 DETAIL 3.1 The proposed strategic goal for the Nature Restoration Fund is “to catalyse action at scale to protect and restore nature and Scotland’s biodiversity in land and at sea”. The fund has an increased focus on outcomes which address the main drivers of the decline in biodiversity – on land, over-exploitation of the natural environment and addressing its consequences, habitat loss and fragmentation, and invasive non-native species – particularly rural biodiversity. 3.2 The Fund has four strategic themes to be delivered across all the funding streams:- Habitat restoration – management for enhancement and connectivity Freshwater restoration, including hydrological change Eradication of invasive non-native species impacting on nature Coastal and marine management to promote restoration and resilience 3.3 The Council has been allocated £835,000 of funding since 2021. 3.4 The current remaining funding for Argyll and Bute Council totals £577,000. If the Policy and Resources Committee were minded to agree to the projects set out in Appendix 2 of this report, this would leave a surplus of £2,000 of funding. 3.5 Officers have reviewed the suggestions submitted by Elected Members, and have concluded that one of the proposals fits with the Nature Restoration Fund criteria, as set by the Scottish Government. All suggestions received and officers’ conclusions are set out in Appendix 1 of this report. 4.0 CONCLUSION 4.1 This report recommends that the Council take forward a number of deliverable projects, utilising the Nature Restoration Fund allocated by the Scottish Government. 5.0 IMPLICATIONS 5.1 Policy - There are no policy implications arising directly from this report. 5.2 Financial - There are no direct financial implications arising from this report, however, it should be noted that some of the projects do remove a financial cost to the Council, and therefore can be classed as cost avoidance for the Local Authority. 5.3 Legal - There are no legal requirements arising directly from this report. 5.4 HR - There is a resource requirement for staff to implement the projects. 5.5 Fairer Scotland Duty 2021/22 £108,000 2022/23 £238,000 2023/24 £489,000 Page 238
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5.5.1 Equalities – Protected Characteristics – None. 5.5.2 Socio Economic Duty – None. 5.5.3 Islands - None arising directly from this report. 5.6 Risk - There is a risk of loss of funding should the Council not spend this funding allocated by the Scottish Government. 5.7 Climate Change - The Nature Restoration Fund aims to support large-scale, multi-year, multi-partner projects which deliver transformative change to drive forward nature recovery and address biodiversity loss and climate change. 5.8 Customer Service – communities across Argyll and Bute will benefit from this funding. Kirsty Flanagan, Executive Director with overall responsibility for Development and Economic Growth, and Road and Infrastructure Services Douglas Hendry, Executive Director with overall responsibility for Commercial Services Policy Lead for Climate Change and Environment Services, Councillor Ross Moreland Policy Lead for Planning and Regulatory Services, Councillor Kieron Green For Further Information:- Fergus Murray, Head of Development and Economic Growth Fergus.Murray@argyll-bute.gov.uk Jim Smith, Head of Road and Infrastructure Services Jim.Smith@argyll-bute.gov.uk Ross McLaughlin, Head of Commercial Services Ross.McLaughlin@argyll-bute.gov.uk APPENDICES Appendix 1 – List of Projects submitted by Elected Members Appendix 2 – List of recommended projects Page 239
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APPENDIX 1 – LIST OF PROJECTS SUBMITTED BY ELECTED MEMBERS Suggestion Comments Backs Water - formal response from SEPA Lochgilphead relating to recent works relating to clearing the watercourse and banks maintenance. This is something that is done every 10years which impacting on the habitat that handrails the watercourse. Though present fish stocks are unknown, work is restricted to March - September due to trout and salmon migration. This is an interesting proposal along with the history of this water course, however the Nature Restoration Fund is for works to be carried out on council land or land controlled by the council. Officers would advise that the land owner engage with NatureScot or RPIDD directly to seek funding to restore the habitat(s). On Bute there is a potential project on Bute. Restoration of Tom’s Cuts under the criteria of water ways. It could reduce risk of flooding at Rothesay Joint Campus, reduce risk of flooding at the Meadows area, improve amenity at Lovers Lane, and support improved water flow. Officers recognise the proposal would have positive effect on the Rothesay Joint Campus and the Meadows, this requires further investigation however to establish ownership, costings and deliverability. I have been concerned for some years now about the condition of the former skating pond in Helensburgh. When it was originally redesigned it had new islands built for the safe breeding of water fowl and there was plenty of swim space safe from foxes and other hunters. Over the ensuing years the pond has become so overgrown that you can probably walk to the islands with comparative ease and there I very little swim space left. It would like to see some of this money used to restore the habitat and ensure the continued breeding of wild ducks, moorhens and visits by herons which were common place as well as a good look at ways of enhancing the whole area for wild life habitat. I am aware that there was an upkeep agreement between the council and the water authority when the original changes were made but that that seems to have vanished into the archives. Proposal for opening up some areas of vegetation to allow wildlife and other users (pond boats and ice- skating if the weather permits) access to open water. The proposal fits with the criteria set out in the Nature restoration Fund. We will work up a project brief to deliver this proposal. An initial £50k has been identified to take a phased approach with this project. Page 240
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APPENDIX 2 – LIST OF RECOMMENDED PROJECTS OPTION INDICATIVE COST COMMENT CATEGORY Control of invasive non- native species on Council assets (spraying or removal Japanese Knotweed, Rhododendron ponticum etc). £100k It’s a legal requirement to control INNS. Proposed four year eradication plan based on repeat applications of Glyphosate or other approved chemical to target hotspot areas of worst species with the aim to be successful. . Applications generally need to be made over a 3 - 4 year period. This proposal will be carried out within the road corridor or other areas of Council controlled land but with a requirement for adjacent landowners to carry out treatments to land which they control. Locations are extensive across Argyll and Bute. The intention would be to carry out the majority of these works deploying Council trained resource. However, in extremely dense areas, where there will be a need to carry out some works through stem injections, a contractor would be sought due to the intense labour requirement for this task. Cost avoidance / benefit on council assets, community, place and biodiversity. Tree Planting Fund £75k Competitive fund to grant funds to local groups, schools or community organisations to plant native trees across Argyll and Bute. Community / place / biodiversity- habitat creation/enhancement / carbon sequestration. Play park enhancements £80k This proposal is to complement the ongoing Benefit to council assets, cost Page 241
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(total based over 2 – 3 year programme) Play Park Renewal Fund and would further enhance that programme by converting some areas of tired and aged hard landscaping to meadow. The additional areas of grass cutting would be negligible and this proposal would remove long term maintenance costs associated with hard paving and also approve the local aesthetics. avoidance, carbon sequestration, water absorption, community, place and biodiversity in terms of habitat creation that benefits pollinator’s. Woodland clearance and native replanting at Kilmory Estate / Kilmory Business Park £50k Woodland creation in and around Kilmory Estate and Screening Business Park over mature and likely require felling and re- planting. Using a mix of native species that will enhance local biodiversity. Note that in October 2023, the P&R Committee agreed to £50k of funding – this brings the total of this project to £100k of funding as it better reflects the scale of the works involved. Habitat Restoration- removal of INNS and native tree planting which will contribute to biodiversity and carbon sequestration for climate change. School food waste composting £60k In schools that don’t have food waste uplift investigate setting up of local composting solutions to be used onsite. Education / minor cost avoidance on waste front/ organic fertiliser for school plantings. Woodland Planting at Dalinlonghart Dunoon £100k Previous forested area was harvested, there is an obligation on the part of the Council to replant this site which is adjacent to the landfill site currently operated by Renewi (which will transfer back to the Council at the end of the PPP contract in Sept 2026). This will remove a future financial pressure for the cost of the planting and will also produce a long term income source when the timber can be harvested and sold to the commercial market. Nature Restoration - Benefit to Council assets, cost avoidance, carbon sequestration for climate change and woodland biodiversity. Peat Bog Restoration £60k As above Community / Place, Carbon Page 242
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sequestration which helps to address climate change and Biodiversity. Former skating pond in Helensburgh £50k Opening up some areas of invasive vegetation to allow wildlife and other users access to open water. Nature restoration/water quality. TOTAL SPEND: £575,000 The costings associated with each project in Appendix 2 are estimates, and may be subject to change as projects develop. Page 243
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ARGYLL AND BUTE COUNCIL POLICY & RESOURCES COMMITTEE CHIEF EXECUTIVE 7 DECEMBER 2023 SINGLE AUTHORITY MODEL - UPDATE 1.0 EXECUTIVE SUMMARY 1.1 A report was tabled at the Policy and Resources (P&R) Committee held on 11th May 2023, which provided an overview of the emerging public sector reform and associated legislation that was likely to result in fundamental changes to how public sector services are delivered and how decisions are made. This included proposals to pursue options for a Single Authority Model (SAM) for Argyll and Bute and the P&R agreed that:- i. There be further exploration of the options for a Single Authority Model for Argyll and Bute; and ii. Exploratory discussions with the Scottish Government be commenced and that the Chief Executive seek inclusion in the Single Island Authority meetings already in train. 1.2 This paper provides Members with an update on the progress that has been made in terms of exploring options for a SAM for Argyll and Bute and the engagement that has taken place to date with the Scottish Government (SG) and other key partners. 1.3 It is recommended that members:- Note that the SG have formally advised the Council that Ministers welcome our involvement in discussions on Single Authority Models; Consider the ongoing engagement and collaboration with key partners to develop suitable options, as set out at 4.3 and 4.4; Note that a further report will be prepared for P&R Committee following the completion of work to articulate the benefits and key objectives associated with each option. Page 245 Agenda Item 10
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ARGYLL AND BUTE COUNCIL POLICY & RESOURCES COMMITTEE CHIEF EXECUTIVE 7 DECEMBER 2023 SINGLE AUTHORITY MODEL - UPDATE 2.0 INTRODUCTION 2.1 Following approval by Members at the P&R Committee held on 11th May 2023 to undertake preliminary discussions with the SG, the Chief Executive wrote to the Director for Public Sector Reform, who has confirmed that Ministers would welcome the involvement of Argyll and Bute Council in looking at alternative local governance models, which will potentially bring a range of benefits to communities across the area. 2.2 This reports provides an update on the collaboration that has taken place in the interim period and what the next steps are. 3.0 RECOMMENDATIONS 3.1 It is recommended that members:- Note that the SG have formally advised the Council that Ministers welcome our involvement in discussions on Single Authority Models; Consider the ongoing engagement and collaboration with key partners to develop suitable options, as set out at 4.3 and 4.4; Note that a further report will be prepared for P&R Committee following the completion of work to articulate the benefits and key objectives associated with each option. 4.0 DETAIL 4.1 Argyll and Bute is made up of a rich mix of remote, rural and island communities, which present a number of unique challenges in terms of service delivery. In recognition of the demographics and geography, and the emerging public sector reform, we are making a shift in public sector structures through increased collaboration and joint working. However, there is a need to build on this in order to address the challenges we face and to realise the full potential of the area, via a whole system approach such as a SAM. 4.2 Public sector service sustainability in Argyll and Bute requires a multi-agency integrated model, a variety of hyper local delivery models, robust infrastructure, Page 246
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and the coordination of planning and commissioning for the longer term, which supports public sector organisations to meet their legislative and public duties. 4.3 Since the P&R Committee in May 2023 the Council have been engaging with a wide range of key partners on the concept of a SAM, including:- Scottish Government – engagement with senior civil servants to date has been positive. Ministers have now formally agreed that the Council can participate in relevant meetings arranged by the SG including the Islands Engagement Group; Information and development sessions have been held with:- elected members – P&R, Policy Leads/ELT Leadership Development Session – Council/HSCP/NHS Highland senior representation Integrated Joint Board and Development Session NHS Highland Board – Strategy and Development Session NHS Highland Executive Development Group Engagement will all key stakeholders will continue as the proposals for a SAM in Argyll and Bute are developed. 4.4 In terms of next steps, the following key actions will be progressed over the coming months:- 4.4.1 A review of all relevant legislation pertaining to each of the potential options will be undertaken by the Officer Working Group set up to oversee this work, to fully understand the potential technical/legislative implications. 4.4.2 The SG have asked us to undertake further work in respect of the potential benefits that alternative local governance models could bring for the people of Argyll and Bute. For example, shared corporate services, place based approach, adoption of a preventative model, development of a bespoke health and care strategy which meets the unique needs for the area, improved outcomes for our communities etc… This work will be undertaken in collaboration with key HSCP and NHS Highland colleagues, with an initial workshop scheduled for mid- December. Once the key benefits/objectives have been developed, this will provide a basis on which to fully appraise each of the potential options. 4.4.3 Liaise with the other Island Authorities involved in developing SAMs, including Western Isles and Orkney Councils, to identify any shared learning opportunities as part of this process. 4.4.4 Engagement in workshops to be arranged by the SG to progress SAMs, in consultation with other local authorities. 4.5 A further report will be prepared for a future P&R Committee following the progression of the above actions. Page 247
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5.0 CONCLUSION 5.1 Following engagement with senior civil servants within the SG, the Chief Executive has had confirmation that Ministers would welcome the involvement of Argyll and Bute Council in looking at alternative local governance models, which will potentially bring a range of benefits to communities across the area. 5.2 Officers have been engaged in ongoing discussions with the SG and have participated in a number of information and development sessions with key partners such as HSCP and NHS Highland to develop our thinking around what a SAM could look like for Argyll and Bute. A number of next steps have been set out at 4.4 above, including a review of the relevant legislation and development of the key objectives and benefits driving this work, to enable an appraisal of options to be undertaken. 6.0 IMPLICATIONS 6.1 Policy; currently none but with the potential for significant implications due to emerging national policies. 6.2 Financial; none at present - exploration of a SAM will consider any financial implications arising. 6.3 Legal; a review of all relevant legislation will be undertaken as part of the development of any options for a SAM 6.4 HR; none at present – as the proposals develop there may be a requirement for additional resource to support this work. 6.5 Fairer Scotland Duty: none 6.5.1 Equalities - protected characteristics; none 6.5.2 Socio-economic Duty; none 6.5.3 Islands; none 6.6. Climate Change; none. 6.7 Risk; failure to explore options for the best model for our communities and influence the national development of reforms. 6.8 Customer Service; none. Pippa Milne - Chief Executive Councillor Robin Currie – Leader of the Council 16 November 2023 Page 248
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Policy and Resources Committee Work Plan 2023-2024 This is an outline plan to facilitate forward planning of reports to the Policy and Resources Committee. Date Report Title Dept/Section How Often? Date Due Comments 7 December 2023 Financial Report Monitoring Pack Financial Services 7 November 2023 7. Budget Outlook 8. Financial Services 9. Budget Update 2024/25 10. Financial Services 11. Annual Review of Procurement Strategy and Sustainable Procurement Policy 12. Legal and Regulatory Support Nature Restoration Fund – Spend Options Development and Economic Growth; Roads and Infrastructure Services; and Commercial Services Conservation Area Regeneration Scheme (CARS) Projects – 2-4 and 6-10 Argyll Street, Lochgilphead Development and Economic Growth Single Authority Model Update Chief Executive Page 249 Agenda Item 11
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Policy and Resources Committee Work Plan 2023-2024 Date Report Title Dept/Section How Often? Date Due Comments 15 February 2024 Financial Report Monitoring Pack Financial Services Every meeting except May 16 January 2024 Budget 2024-2025 Financial Services Treasury Management Strategy Financial Services 13. Strategic Events and Festivals Development and Economic Growth 9 May 2024 Budget Outlook Financial Services 9 April 2024 Budget Approach for future years Financial Services TBC August 2024 Financial Report Monitoring Pack Financial Services Every meeting except May 16 January 2024 Budget Outlook Financial Services Community Empowerment (Scotland) Act 2015 – Update on Expressions of Interest / Asset Transfer Requests Commercial Services Future Items – Date to be determined. Key Performance Indicators FQ2 – 2022/2023 – changing to Corporate Outcome Indicators Customer Support Services Annual Historic Environment Scotland Heritage and Place Programme – Opportunity for Place Based Heritage Funding Development and Economic Growth UK Shared Prosperity Fund – Argyll and Bute Investment Plan Development and Economic Growth Regular updates to be provided. Agreed 11.08.2022 Page 250
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Policy and Resources Committee Work Plan 2023-2024 Rothesay Pavilion - Rural Growth Deal Development and Economic Growth Update to be provided following approval of the Rural Growth Deal Full Business Case by the UK and Scottish Government. Page 251
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