Agenda Document Pack - Midlothian Integration Joint Board - 18/09/2025
Midlothian Council · 18 September 2025
Back to Midlothian Integration Joint Board — 18 September 2025 and its agenda
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Notice of Meeting and Agenda Midlothian Integration Joint Board Venue: Normandy Court/ Hybrid, Normandy Court, 20 Normandy Dr, Dalkeith, EH22 1JG Date: Thursday, 18 September 2025 Time: 15:00 Morag Barrow Chief Officer Contact: Clerk Name: Democratic Services Clerk Telephone: 0131 271 3160 Clerk Email: democratic.services@midlothian.gov.uk Further Information: This is a meeting which is open to members of the public. Page 1 of 86
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1 Welcome, Introductions and Apologies 2 Order of Business Including notice of new business submitted as urgent for consideration at the end of the meeting. 3 Declaration of Interest Members should declare any financial and non-financial interests they have in the items of business for consideration, identifying the relevant agenda item and the nature of their interest. 4 Minute of Previous Meeting No items for discussion 5 Public Reports For Decision 5.1 Midlothian IJB Audited Annual Accounts 2024/2025 - Paper presented by Chris King, Chief Financial Officer (15:05 - 15:35) 3 - 80 5.2 Midlothian IJB Directions 2025/2026 and Financial Planning - Paper presented by Gill Main, Integration Manager (15:35 - 15:50) 81 - 86 6 Private Reports No items for discussion 7 Date of Next Meeting The next meeting will be held on Thursday 9th of October 2025, 14:00-16:00. Midlothian Integration Joint Full Board Meeting will be held in Normandy Court and via Ms Teams. Page 2 of 86
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Midlothian Integration Joint Board Thursday, 18th September 2025, 14:00-16:00 Midlothian IJB Audited Annual Accounts 2024/25 Executive summary This report presents the Integration Joint Board’s (IJB) Audited Annual Accounts for 2024/25. As a statutory body, the IJB is required to produce a set of annual accounts at the end of its financial year (31st of March). These accounts are then reviewed by the IJB’s external auditors who report their opinion of the IJB’s annual accounts to the IJB’s Audit and Risk Committee. Audit Scotland, as the independent auditors, have given the accounts an ‘unqualified’ opinion which means that they meet the requirements of the regulations and give a fair and true view of the IJB’s financial position in 2024/25. The Independent Auditor reported her view to the meeting of the IJB’s Audit and Risk committee on 4th September 2025. The IJB’s Audit and Risk committee is satisfied with the report of the Independent Auditor and recommends that the Annual Accounts are approved by the IJB. A full version of the audited annual accounts is detailed in Appendix 1. As a result of this report, Members are asked to: Note the report of the independent auditor Approve the IJB’s annual accounts for 2024/25 Item number: 5.1 Page 3 of 86
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Midlothian Integration Joint Board Report Midlothian IJB Audited Annual Accounts 2024/25 1 Purpose 1.1 This report presents the Midlothian IJB audited annual accounts for 2024/25 (appendix 1) for review ahead of recommendation to Midlothian IJB for approval. 2 Recommendations 2.1 As a result of this report, Members are asked to: Note the report of the independent auditor Approve the IJB’s annual accounts for 2024/25 3 Background and main report 3.1 In accordance with Section 110 of the Local Government (Scotland) Act 1973, and the relevant regulations and subsequent legislation, the Integration Joint Board (IJB) is required to prepare a set of annual accounts. These accounts must comply with the statutory requirements and provide a true and fair view of the IJB’s financial position. 3.2 The accounts are subject to independent external audit. The appointed auditor reviews the accounts and reports their findings to the Audit and Risk Committee, providing an opportunity to highlight any issues or matters requiring attention 3.3 The auditor’s opinions on the 2024/25 accounts are unqualified. This means the auditor is satisfied that the accounts were free from material misstatement. 3.4 The Independent Auditor reported her view to the meeting of the IJB’s Audit and Risk committee on 4th September 2025. The IJB’s Audit and Risk committee is satisfied with the report of the Independent Auditor and recommends that the Annual Accounts are approved by the IJB. 3.5 A full version of the external audit annual audit report is detailed in Appendix 2. 4 Policy Implications 4.1 This report does not have any direct impact on policy. 5 Directions 5.1 This report does not have any direct impact on existing Directions. Page 4 of 86
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Midlothian Integration Joint Board 6 Equalities Implications 6.1 This report does not have any direct impact on equalities. 7 Resource Implications 7.1 There are no resource implications arising from this report. 8 Risk 8.1 The risks raised by this report are already included within the IJB risk register. 9 Involving people 9.1 This report has been written following consultation with our NHS Lothian and Midlothian Council financial Partners, officers of Midlothian IJB, and with the Midlothian HSCP executive management team. 10 Background Papers 10.1 There are no background papers. Author’s Name Chris King Designation Interim Chief Finance Officer Contact Information Chris.King@nhs.scot Date 09/09/2025 Appendices: Appendix 1: Midlothian IJB Audited Annual Accounts 2024/25 Appendix 2: Audit Scotland draft Audit Report 2024/25 Page 5 of 86
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1 Midlothian Integration Joint Board (IJB) Audited Annual Accounts 2024/25 The Annual Accounts of Midlothian Integration Joint Board for the period from 1 April 2024 to 31 March 2025, prepared pursuant to Section 105 of the Local Government (Scotland) Act 1973 and in accordance with the terms of the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2024/25. Page 7 of 86
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2 Contents Audit Arrangements..................................................................3 Management Commentary........................................................4 IJB Financial Performance in 2024/25.......................................13 Statement of Responsibilities..................................................22 Remuneration Report..............................................................24 Annual Governance Statement 2024/25...................................28 Independent Auditor’s Report..................................................35 Comprehensive Income and Expenditure Statement ................40 Movement in Reserves Statement............................................41 Balance Sheet.........................................................................42 Notes to the Financial Statements...........................................43 Page 8 of 86
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3 Audit Arrangements Under arrangements approved by the Accounts Commission of Local Authority Accounts in Scotland, the auditor with responsibility for the audit of the accounts of Midlothian Integration Joint Board for the period 1 April 2024 to 31 March 2025 is Audit Scotland, 102 West Port, Edinburgh EH3 9DN. Page 9 of 86
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4 Management Commentary The management commentary considers the work and financial performance of Midlothian Integration Joint Board (IJB) during the financial year 2024/25. It provides an overview of the role, remit, members, objectives, and the strategy of the Board. The role and responsibilities of the IJB The IJB is an Integration Authority set up under the Public Bodies (Joint Working) (Scotland) Act 2014. Midlothian IJB plan for the delivery of functions that have been delegated to us by Midlothian Council and NHS Lothian. These are: Adult Social Care (Including Criminal Justice) Primary Care (GP Practices, Community Dentists, Community Pharmacies and Community Opticians) Mental Health Physical and Learning Disabilities Community Health Community Hospital Unscheduled Care (generally delivered from the Royal Infirmary of Edinburgh, the Western General Hospital and St. John’s Hospital). We assumed strategic formal responsibility for these functions in April 2016 including managing the budgets to deliver them. We approved our third Strategic Plan for 2022-2025 in April 2022. In August 2023, work began to develop the draft Strategic Plan for 2025-2035. This new Strategic Plan is currently being reviewed by the relevant Committees and Boards of both our NHS Lothian and Midlothian Council Partners. The scheduled publication date of the Midlothian IJB Strategic Plan 2025-2035 is October 2025. Page 10 of 86
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5 Membership and meetings of the IJB The IJB met 8 times in 2024/25 for formal business meetings. We also met for 5 IJB Development sessions and 2 financial briefings. The members of the IJB as of March 2025 are as follows: Member Nominated/Appointed by Role Conor McManus Nominated by Midlothian Council Voting Member, Chair Val de Souza Nominated by NHS Lothian Voting Member, Vice Chair and Chair of the Audit and Risk Committee Pauline Winchester Nominated by Midlothian Council Voting Member Derek Milligan Nominated by Midlothian Council Voting Member Kelly Parry Nominated by Midlothian Council Voting Member Dr Amjad Khan Nominated by NHS Lothian Voting Member Andrew Fleming Nominated by NHS Lothian Voting Member Vacant Nominated by NHS Lothian Voting Member Morag Barrow Appointed by the IJB Chief Officer Chris King Appointed by the IJB Interim Chief Finance Officer Nick Clater Nominated by Midlothian Council Social Work Representative Fiona Stratton Nominated by NHS Lothian Nursing Representative Claire Ross Nominated by NHS Lothian AHP Representative Dr Rebecca Green Nominated by NHS Lothian Primary Care Representative Dr Wendy Metcalfe Nominated by NHS Lothian Medical Practitioner Representative Grace Chalmers Nominated by Midlothian Council Partnership Representative (MLC) Jordan Miller Nominated by NHS Lothian Partnership Representative (NHS) Magda Clark Appointed by the IJB Third Sector Representative Keith Chapman Appointed by the IJB Lived Experience Representative Vacant Volunteer Representative Vacant Carer Representative Notes David King was the IJB’s Chief Finance Officer until 6th of December 2024 when he retired. Chris King has been appointed as interim Chief Finance Officer until a permanent appointment can be made. Page 11 of 86
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6 IJB Vision and Objectives Our vision and objectives in the IJB’s Integration Scheme reflect the 9 national health and wellbeing outcomes which apply to integrated health and social care. National Health & Wellbeing Outcome 1 Health & Wellbeing People are able to look after and improve their health and wellbeing and live in good health for longer. 2 Living in the Community People are able to live, as much as possible, independently and at home or in a homely setting in their community. 3 Positive Experiences & Dignity People who use health & social care services have positive experiences of those services, and have their dignity respected 4 Quality of Life Health & social care services help to maintain or improve the quality of life of people who use those. 5 Health Inequalities Health & social care services contribute to reducing health inequalities. 6 Support for Carers People who provide unpaid care are supported to look after their health and wellbeing. 7 Safe from Harm People using health & social care services are safe from harm. 8 Workforce Staff are engaged with their work and are supported to continuously improve the information, support, care, and treatment they provide. 9 Use of Resources Resources are used effectively and efficiently. We also contribute to the achievement of the national criminal justice outcomes. This is because the NHS Lothian and Midlothian Council agreed to delegate criminal justice social work to Midlothian IJB in the Midlothian Scheme of Integration. Page 12 of 86
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7 IJB Activities for 2024/25 Strategic Plan The Public Bodies (Joint Working) (Scotland) Act 2014 places a statutory duty on the IJB to develop a Strategic Plan that directs how delegated health and social care functions will be planned and delivered. This includes how resources will be used to meet agreed priorities. Officers from Midlothian Health and Social Care Partnership (HSCP) established a dedicated project team in August 2023 to develop a Strategic Plan for 2025-2035. The approach has been guided by Scottish Government statutory guidance and has followed the required consultation and governance procedures led by the Strategic Planning Group, and involving NHS Lothian, Midlothian Council, third and independent sector partners, and the wider public. Between September and November 2023, an initial consultation gathered feedback on the 2022–2025 Strategic Plan and identified emerging priorities. This informed the development of strategic proposals, which we reviewed during a development session in January 2024 and subsequently approved in February 2024. A first draft of the new Strategic Plan 2025 -2035 was developed during February and March 2024 with a revised second draft produced following further IJB and Strategic Planning Group sessions, leading to its approval in August 2024 for a statutory three-month public consultation period. During the consultation period (August–November 2024), the Strategic Planning Group conducted an Equality and Children’s Rights Impact Assessment, which informed final revisions. Feedback from consultation, the Impact Assessment, and the audit were incorporated into the draft, with final adjustments made in close consultation with both NHS Lothian and Midlothian Council. In December 2024, we agreed to delay the publication of the final plan to ensure alignment with 2025/26 budget decisions and a reflection of operational transformation planning. Throughout the process, engagement with Partner organisations has been sustained through direct discussions with senior leaders, strategic leads, and representation on the Strategic Planning Group. The voices of more than 1,500 individuals, services, and organisations have contributed to the development of this plan. The Strategic Plan remains a dynamic and evolving document and is planned for publication in October 2025. Page 13 of 86
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8 Annual Performance Report - Operational Performance The Annual Performance Report for 2024/25 details progress in delivering our strategic priorities, as well as performance in relation to the Scottish Government’s national health and wellbeing outcomes and associated indicators. The National Indicators Indicators 1- 9 are taken from the Health and Care Experience Survey, which is conducted every 2 years. This is not a reporting year for the Health and Care Experience Survey, so there is no change from our Annual Performance Report 2023/24. Results for indicators 2, 3, 4, 5, 7 and 9 are not directly comparable to previous years due to changes in survey wording. Indicator 10 is still in development and is therefore not published. Information for Indicator 11 has not yet been published nationally Indicators 12 to 19 have been updated this year by Public Health Scotland and are compared with the results from last year. How we are reporting our data Full data is provided in the Appendix of our APR. This includes our progress over time and our position in comparison to the rest of Scotland. We look at each of the Health and Wellbeing Outcomes alongside the National Performance Indicators used to measure each one and summarised our progress: - Our performance has improved compared to last year. - There hasn’t been a significant change in performance compared to last year. - Our performance has worsened compared to last year. Page 14 of 86
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9 National Indicator Our result Our Progress Adults are able to look after their health very well or quite well. 92.5% Adults supported at home agreed that they are supported to live as independently as possible*. 76.5% Adults supported at home agreed they had a say in how their help, care or support was provided*. 61.9% Adults supported at home agreed that their health and social care services seemed to be well coordinated*. 74.4% Adults receiving care or support rated it as excellent or good*. 65.6% Adults had a positive experience of the care provided by their GP practice. 67.9% Adults supported at home agreed services and support had an impact on improving or maintaining their quality of life*. 76.0% Carers feel supported to continue in their caring role. 34.6% Adults supported at home agreed they felt safe*. 79.9% National Indicator Our result Our Progress Premature Mortality Rate. (People under 75) Note 2 Page 15 of 86
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10 National Indicator Our result Our Progress Emergency Admission Rate. 9,778 per 100,000 Emergency Bed Day Rate. 108,536 per 100,000 Readmission to hospital within 28 days. 93 per 1,000 Proportion of the last 6 months of life spent at home or a community setting. 87.8% Falls Rate (People over 65 who were admitted to hospital). 24 Care services graded Good or better in Care Inspectorate Inspections. 77.2% Adults with intensive care needs are receiving care at home. 57.7% The number of days people aged over 75 spend in hospital when they are ready to be discharged. 928 per 1,000 Health and Care resource spent on hospital stays where the person was admitted as an emergency. 23% Page 16 of 86
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11 Future Plans – Bold and Sustained Transformation Public sector finances are under significant pressure across Scotland. The wider economic climate and the ongoing cost of living crisis continue to create uncertainty. These financial challenges are intensified by a growing and ageing population, rising levels of frailty and long-term conditions, and increasing complexity in the care and support that people require. Workforce challenges and limited financial resources impact the ability to sustain current models of care. In response, we recognise the urgent need for bold and sustained transformation. Our Strategic Plan and Medium-Term Financial Strategy will form the foundations for a new sustainable model for health and social care focusing on prevention, early intervention, and integrated, person led care. To achieve transformation on scale strong leadership, cross sector collaboration, and meaningful engagement with communities will be essential to ensure that services remain sustainable, equitable, and responsive to local needs. A Transformation Programme Board will develop and oversee these changes. Work of the Transformation Programme Board Shift the focus away from specialist services toward a broader range of community-based services across health, social care, and primary care. Invest more in early intervention, self-management, education, and primary and community care services. Promote and embed a person-led, strengths-based approach to improve the outcomes that matter most to people and communities. Build on the principles of the Public Bodies (Joint Working) (Scotland) Act 2014, to develop more personalised and flexible services, planned together. Continue to support the implementation of the Social Care (Self-Directed Support) (Scotland) Act 2013, recognising individuals as experts in their own lives, with a range of assets and skills. Develop a single point of access to help people navigate services more easily and get the right support at the right time. Redirect resources to areas of high priority. This may mean disinvestment in some services. Workstreams that will support the transformation Palliative Care Bed based provision – Care Home and Community Hospitals Home First Model of Care Primary, Community and Social Care Commissioning and Third sector Community Assets Mental Health/Dementia Midlothian Community Front Door (Single Point of Access) Page 17 of 86
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12 Enabling factors essential to the transformation. Finance and Resource - ensuring sustainable funding models and the effective use of available resources. Business, Intelligence, and Insight - providing timely and accurate data to support evidence-based decisions. Workforce - focusing on recruiting, retaining, and developing the right skill mix to meet future demand. Carers - recognising and supporting unpaid carers as critical partners in care delivery. Sustainability (including digital) - embedding environmentally conscious practices while utilising digital tools to enhance efficiency and access. Communication Strategy - ensure consistent, transparent messaging and active engagement with stakeholders throughout the transformation journey. Page 18 of 86
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13 IJB Financial Performance in 2024/25 For the year ending 31 March 2025 the IJB recorded a surplus of £0.149 million. The IJB incurred operational overspends in both Health and Social Care services during the 2024/25 financial year which amounted to £2.949 million and £4.883 million respectively. In line with the Integration Scheme, both Partners, NHS Lothian and Midlothian Council, provided additional year end funding allocations to fully cover these overspends. The reported surplus is a result of an increase in the level of Earmarked Reserves held by the IJB. These reserves are set aside to fund specific future commitments and priorities. Summary of the IJB’s financial position for the year ending 31 March 2025 Year-end position Health £000’s Social Care £000’s Total £000’s Income Income received from the partners Midlothian Council and NHS Lothian in 2024/25 132,629 64,189 196,818 Additional Income One off income received from partners to ensure the IJB achieved financial balance. 2,949 4,883 7,832 Expenditure Expenditure incurred by the partners in the delivery of the IJB’s delegated functions for 2024/25. 135,018 69,483 204,501 Surplus/ (Deficit) 560 (411) 149 Analysis of Financial Position Health: As in previous years, the main financial pressure contributing to the overspend within health services continues to be the cost of medications prescribed through GP services. These costs are exceeding the available budget due to a combination of increasing prices and growing demand. Price increases are influenced by new medications, which are often expensive when first released. In addition, the volume of prescriptions continues to rise reflecting Midlothian’s growing and ageing population, and the associated need for increased medical intervention to support people’s health and wellbeing. Another contributing factor to the overspend in health services was the timing of financial recovery actions linked to service redesigns. While a number of planned financial recovery actions were implemented during the year, the full financial benefits were not realised in 2024/25 due to lead in times. The financial Page 19 of 86
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14 benefits associated with these plans are expected to materialise in full during the 2025/26 financial year. Social Care In Social Care services, the overspend was primarily driven by rising demand and increasing complexity of care needs. During 2024/25, a comprehensive review of 585 commissioned care packages across a range of services was undertaken to ensure that individuals' needs were met in the most appropriate and cost-effective way. Despite these efforts, significant financial pressures remained, most notably within the Learning Disability service. In this area, the level and intensity of support required to ensure individuals’ safety and quality of life continued to grow, placing sustained pressure on resources. Page 20 of 86
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15 Funding for the IJB The IJB is funded exclusively by our partners (Midlothian Council and NHS Lothian) to deliver the functions that are delegated to us in the Midlothian Scheme of Integration. A significant proportion of the services that deliver this care and support are operationally managed by Midlothian HSCP. Budget offers (representing the funding) are made to the IJB by the partners before the start of each financial year. We assess these offers and base our acceptance of these offers on the guidance from the Scottish Government which it issues as part of its own budget setting process. The IJB accepted the indicative budget offer from NHS Lothian and the formal budget offer from Midlothian Council in March 2024. NHS Lothian’s funding is for: Health services in Midlothian (Core funding) This includes - the running costs of the local hospitals, - the community health services, - the running costs of the Medical General Practitioners services (the local GPs) - a share of other primary care services (General Ophthalmic Services, General Dental Services and General Pharmaceutical services). Health services for Midlothian residents, delivered and managed on a pan- Lothian basis by NHS Lothian (Hosted funding). This includes - Mental Health inpatients beds at the Royal Edinburgh Hospital. Unscheduled health services for Midlothian residents, delivered and managed by NHS Lothian’s Acute Services (Set Aside funding) This is delivered at the Royal Infirmary of Edinburgh, the West General Hospital and St. John’s Hospital at Howden. This is budget ‘set aside’ by NHS Lothian on behalf of the IJB. Midlothian Council’s funding is for: Adult Social Care services in Midlothian Reserves During the 2023/24 financial year, we fully utilised all of our general reserve. As a result, there were no reserves available to mitigate unforeseen financial pressures in 2024/25. This is a financial risk to both the IJB and its partners, as it significantly reduces our financial resilience and ability to respond to emerging cost pressures or volatility. In response to this risk, we have requested a comprehensive review of our current reserves policy. The existing policy sets out an aspiration to maintain a general reserve equivalent to 2% of annual expenditure. Our Chief Finance Officer will lead this review across 2025/26, assess whether the current target remains appropriate, and consider how financial resilience can be rebuilt over time. The outcomes of the review will be presented to our Audit and Risk Committee prior to making a recommendation to the IJB. Page 21 of 86
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16 IJB spend in 2024/25 - the Financial Statements are on a net basis. Performance of the functions that are delegated to the IJB for 2024/25 Health Budget £000’s Social Care Budget £000’s Health Expenditure £000’s Social Care Expenditure £000’s Variance £000’s Note Direct Midlothian Services Community AHPS 3,828 0 3,772 0 56 Community Hospitals 7,146 0 7,142 0 4 District Nursing 9,002 0 9,228 0 (225) General Medical Services 19,549 0 19,726 0 (176) Health Visiting 2,784 0 2,720 0 64 Mental Health 3,215 0 3,045 0 170 Other 8,895 0 9,578 0 (683) 1 Prescribing 20,472 0 22,285 0 (1,814) Resource Transfer 6,973 0 6,941 0 31 2 Older People 0 29,412 0 31,908 (2,495) Learning Disabilities 0 21,298 0 24,456 (3,158) Mental Health 0 1,314 0 1,132 182 Physical Disabilities 0 4,232 0 4,235 (3) Assessment & Care Management 0 4,113 0 3,608 505 Social Care Other 0 3,819 0 3,734 85 3 Midlothian Share of Pan Lothian Set Aside 20,192 0 20,728 0 (535) 4 Mental Health 2,899 0 3,070 0 (170) Learning Disabilities 1,322 0 1,333 0 (11) GP Out of Hours 1,553 0 1,513 0 40 Rehabilitation 990 0 884 0 106 Sexual Health 993 0 965 0 28 Psychology 1,757 0 1,782 0 (26) Substance Misuse 573 0 531 0 42 Allied Health Professions 1,739 0 1,664 0 75 Oral Health 1,034 0 838 0 197 Hosted Other 4,033 0 4,154 0 (121) Dental 7,231 0 7,231 0 0 5 Ophthalmology 2,117 0 2,117 0 0 5 Pharmacy 4,332 0 4,332 0 0 5 Sub Totals 132,628 64,188 135,578 69,072 (7,833) Partner Additional Contributions 2,949 4,883 0 0 7,833 6 Movement in Earmarked Reserves 0 0 (560) 411 149 7 Per Annual Accounts 135,578 69,072 135,018 69,483 149 Page 22 of 86
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17 Notes 1. Other includes £4.816m for the Social Care Fund which is held in the Health Budget but expended in the Social Care services. It also includes the impact of the addition to the Earmarked reserve – see point 7. 2. Resource Transfer are funds for specific purposes which are transferred from Health to Social Care. However, these remain part of the health budget and are reported there. 3. Social Care Other includes care for non-specific groups, substance misuse services and other management and performance costs. 4. Set Aside are the budgets for those functions delegated to the IJB which are managed by the Acute Services management teams within NHS Lothian. These services are delivered at the Royal Infirmary of Edinburgh, the Western General Hospital and St. John’s Hospital and cover the following: Accident and Emergency Cardiology Diabetes Endocrinology General Medicine Geriatric Medicine Rehabilitation Medicine Respiratory Medicine Various ancillary support services for the above 5. Dental, Ophthalmology, Pharmacy - in the health system, expenditure to support the delivery of community dentistry, community opticians and community pharmacists is termed as ‘non-cash limited’ (NCL) but is clearly part of the delivery of primary care services and these functions are delegated to the IJB. However, being NCL there is no budget as such, but any expenditure incurred is supported in its entirety by the Scottish Government. The NCL values are not part of the budget setting process, there being no budget, but NHS Lothian has matched the NCL expenditure with income to cover this expenditure. 6. Additional contributions from Partners - In line with the Integration Scheme, as we do not hold general reserves, any funding shortfalls incurred during the year are met by the respective partner. In 2024/25, we experienced operational pressures in both Health and Social Care services. As a result, both NHS Lothian and Midlothian Council provided additional year-end funding to address the overspends within their respective areas of responsibility. 7. Movement in Earmarked Reserves - The net movement in Earmarked Reserves during the year resulted in a £0.149 million increase in reserves for the IJB. Within Health, reserves held by NHS Lothian increased by £0.560 million, primarily due to the receipt of Unscheduled Care funding. Although this was processed through as expenditure, it is not considered in year spend and has therefore been excluded when calculating the IJB’s net position. Within Social Care, Earmarked Reserve balances were used as planned, resulting in a drawdown of £0.411 million, which is reflected as expenditure. Page 23 of 86
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18 The charges (shown as expenditure above) made by Midlothian Council to the IJB are the net direct costs incurred in the delivery of social care in Midlothian. The charges from NHS Lothian are based on the health budget setting model as agreed by the IJB. That is, charges for the core services (specifically for and delivered by the Midlothian partnership) are based on the net direct actual costs incurred in Midlothian. However, charges for hosted and set aside services (not managed by the Midlothian Health and Social Care Partnership and are delivered on a pan-Lothian basis) are based on the total actual costs for these services shared across four IJBs per the budget setting model. The IJB share of the total actual costs incurred in 2024/25 for hosted services is 10% and, generally, 10% of the Lothian element of the set aside budgets and the non-cash limited budgets. How the IJB spent its funds in 2024/25 Spend 2024/25 £000’s Percentage Share % Adult Social Care Services Includes funds from NHS Lothian which are used to support social care (see note 7 at the end of this report) £82,408 40% Primary Care Services Includes GPs, GP prescribing, community opticians, community pharmacists and community dental services £55,690 28% Other Community Health Services Includes local community hospitals, community nursing services, community allied health professionals and Midlothian’s share of pan-Lothian hosted services £45,675 22% Acute Services Includes Midlothian Share of Acute services that have been delegated to the IJB £20,728 10% Total £204,501 100% Page 24 of 86
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19 Consideration of the financial position At the March 2025 meeting, Midlothian IJB approved the budget offers received from both NHS Lothian and Midlothian Council and were able to set a balanced financial plan for 2025/26. This plan was underpinned by the delivery of £5.8 million in financial recovery actions covering both Health and Social Care functions. It was also agreed that there would be continued engagement with NHS Lothian to address the outstanding financial pressures within Set Aside services. This financial recovery programme represents a significant one-year plan, designed to provide a foundation of financial stability for us. Given the scale and scope of the required financial recovery actions, the programme carries a degree of financial and operational risk. This includes uncertainty around full deliverability, timing, and the potential impact on service delivery. We acknowledge these risks and will manage them proactively. Oversight and mitigation will be supported through established risk management frameworks within the Health and Social Care Partnership and through the governance role provided by our Audit and Risk Committee and our Board. Throughout 2025/26, we will receive routine financial reporting which will include: The overall financial position of the IJB Progress against agreed financial recovery actions Identification of emerging trends, risks, or cost pressures. This reporting will support us in adopting a forward looking and responsive approach to financial governance and management. This will enable timely decision making, ensure we operate within our available resources, and allow for additional financial recovery actions or collaborative solutions with partners if required. Maintaining financial discipline while safeguarding the quality and accessibility of care services will remain a core focus throughout the financial year. Page 25 of 86
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20 Key Risks, challenges and uncertainties The main financial pressures facing us remain consistent with those outlined in the 2023/24 Annual Accounts. These pressures are significant and continuing, and they reflect both national trends and specific local challenges within Midlothian: 1. Demographic Change: A Growing and Ageing Population Midlothian has the fastest growing population in Scotland. While national funding formulas for both Local Authorities and NHS Boards aim to reflect population change, these mechanisms face 2 key limitations: The total funding available has increased but not at a level sufficient to fully meet the scale of the pressures. Declining populations in other areas do not automatically result in proportionate reductions in service delivery costs, which limits the system's ability to redistribute resources effectively. In addition, Midlothian’s population is not only growing but also ageing. As life expectancy increases, so too does the complexity and intensity of health and social care needs. This demographic trend represents a growing and long-term challenge, both locally and nationally. 2. Workforce Availability Both Health and Social Care services continue to experience workforce shortages. The availability of skilled professionals remains a key constraint on the IJB’s ability to meet rising demand and deliver the Strategic Plan. A local workforce plan has been developed in collaboration with partners to mitigate this risk as much as possible. 3. The Wider National Financial Environment The financial landscape for public services remains extremely challenging. While the Scottish Government has expressed a strong commitment to protecting Health and Social Care budgets, it has also acknowledged the broader fiscal pressures facing all public services. National taxation and policy decisions, such as increases in employer National Insurance contributions, are likely to have an impact on service providers. These pressures may increase the cost of commissioned services and threaten the financial sustainability of providers. We do not have dedicated funding to offset these pressures. However, we remain actively engaged with providers and partners to manage the implications and support continuity of service delivery wherever possible. Page 26 of 86
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21 Val de Souza, IJB Chair. Morag Barrow, Chief Officer. Chris King, Interim Chief Finance Officer. Page 27 of 86
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22 Statement of Responsibilities Responsibilities of the IJB We are required to: Make arrangements for the proper administration of our financial affairs and to secure that the proper officer of the board has responsibility for the administration of those affairs (section 95 of the Local Government (Scotland) Act 1973). In this authority, that officer is the Chief Finance Officer. Manage our affairs to secure economic, efficient, and effective use of resources and safeguard our assets. Ensure the Annual Accounts are prepared in accordance with legislation (The Local Authority Accounts (Scotland) Regulations 2014), and so far, as is compatible with that legislation, in accordance with proper accounting practices (section 12 of the Local Government in Scotland Act 2003). Approve the Annual Accounts. I confirm that these Annual Accounts were approved for signature at a meeting of the Audit & Risk Committee. Signed on behalf of Midlothian Integration Joint Board. Val de Souza, IJB Chair. Page 28 of 86
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23 Responsibilities of the Chief Finance Officer The Chief Finance Officer is responsible for the preparation of the IJB’s Annual Accounts in accordance with proper practices as required by legislation and as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the Accounting Code). In preparing the Annual Accounts, the Chief Finance Officer has: Selected suitable accounting policies and then applied them consistently. Made judgements and estimates that were reasonable and prudent. Complied with legislation. Complied with the local authority Code (in so far as it is compatible with legislation). The Chief Finance Officer has also: Kept proper accounting records which were up to date. Taken reasonable steps for the prevention and detection of fraud and other irregularities. I certify that the financial statements give a true and fair view of the financial position of the Midlothian Integration Joint Board at 31 March 2025 and the transactions for the year then ended. Chris King, Interim Chief Finance Officer Page 29 of 86
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24 Remuneration Report Introduction This Remuneration Report is provided in accordance with the Local Authority Accounts (Scotland) Regulations 2014. It discloses information relating to the remuneration and pension benefits of specified IJB members and staff. The information in the tables is subject to external audit. The other sections of this report will be reviewed by Audit Scotland and any apparent material inconsistencies with the audited financial statements will be considered as part of their audit report. Remuneration: IJB Chair and Vice Chair The voting members of the IJB are appointed through nomination by Midlothian Council and NHS Lothian Board. Nomination of the IJB Chair and Vice Chair post holder alternates between a Councillor and a Health Board representative. The IJB does not provide any additional remuneration to the Chair, Vice Chair or any other board members relating to their role on the IJB. The IJB does not reimburse the relevant partner organisations for any voting board member costs borne by the partner. Neither the Chair nor the Vice Chair appointments had any taxable expenses paid by the IJB in 2024/25 (Previous Year: nil). The Chair of the IJB in 2024/25 was Councillor Connor McManus (who is an elected member of Midlothian Council), the Vice Chair was Val de Souza who is a non-executive member of the NHS Lothian Board. The IJB does not have responsibilities, either in the current year or in future years, for funding any pension entitlements of voting IJB members. Therefore, no pension rights disclosures are provided for the Chair or Vice Chair. NHS Lothian no longer automatically offers another full day’s remuneration for being the Board’s Lead Voting Member on an IJB. Instead, non-executive remuneration is based on an individual’s overall estimated time commitment, which can include multiple memberships of Board committees and IJBs as well as other responsibilities, not just as committee chairs or lead voting members of the IJBs. No specific remuneration is therefore available for the vice chair of the IJB in 2024/25 (Previous Year: nil). Page 30 of 86
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25 Remuneration: Officers of the IJB The IJB does not directly employ any staff; however specific post-holding officers are non-voting members of the Board. Chief Officer Under section 10 of the Public Bodies (Joint Working) (Scotland) Act 2014 a Chief Officer for the IJB has to be appointed and the employing partner has to formally second the officer to the IJB. The employment contract for the Chief Officer will adhere to the legislative and regulatory framework of the employing partner organisation. The remuneration terms of the Chief Officer’s employment are approved by the IJB. The Chief Officer of the IJB is Morag Barrow, who is also the Director of Health and Social Care for Midlothian Council and the Joint Director of the Midlothian Partnership. It has been agreed that 50% of her total remuneration is to be shown in the accounts of the IJB as her remuneration as the Chief Officer of the IJB. Chief Finance Officer Although the costs of the Chief Finance Officer are not included in the charges made to the IJB by either partner, given the S95 role of the Chief Finance Officer and in the interests of transparency, the remuneration of the Chief Finance Officer is included. David King was Chief Finance Officer until the 6th December 2024 and was employed by NHS Lothian and had two roles – Midlothian IJB’s Chief Finance Officer, the Chief Finance Officer of East Lothian IJB. On that basis, 50% of the total remuneration for David King between 1st April 2024 and 6th December 2024 is shown below. From the 19th of December 2024 until 31st March 2025, Chris King was appointed as Chief Finance Officer on an interim basis. He is employed by NHS Lothian. His role is that of Chief Finance Officer with Midlothian IJB and an operational role in the NHS Lothian finance team as a Finance Business Partner. Therefore, 50% of the total remuneration during this period is shown below. Other Officers No other staff are appointed by the IJB under a similar legal regime. Other non-voting board members who meet the criteria for disclosure are included in the disclosures. Senior Employees: Salary, Fees & Allowances: Name 2023/24 £ 2024/25 £ Full Year Equivalent Morag Barrow £55,822 £59,048 £59,048 Claire Flanagan £15,038 - - David King £10,272 £23,522 £34,342 Chris King - £11,832 £41,526 Page 31 of 86
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26 The IJB has responsibility for funding the employer contributions for the current year in respect of the officer time spent on fulfilling the responsibilities of their role on the IJB. The following table shows the IJB’s funding during the year to support officers’ pension benefits. The tables also show the total value of accrued pension benefits which may include benefits earned in other employment positions and from each officer’s own contributions. In year pension contributions Name For year to 2024 (£) For Year to 2025 (£) Claire Flanagan £3,077 - Morag Barrow £0 £12,241 Chris King - £2,662 Note 1: Morag Barrow became an active member of the SPPA in 2024/25. Note 2: David King is no longer an active member of the SPPA. Total value of accrued pension benefits which may include benefits earned in other employment positions and from each officer’s own contributions Name Pension (as at 31 March 2024) £000’s Lump Sum (as at 31 March 2024) £000’s Pension (as at 31 March 2025) £000’s Lump Sum (as at 31 March 2025) £000’s Morag Barrow £0 £0 £30 £82 Claire Flanagan £22 £55 - - Chris King - - £9 £0 Disclosure by Pay Bands As required by the regulations, the following table shows the number of persons whose remuneration for the year was £50,000 or above, in bands of £5,000. Number of Employees in Band 2023/24 Remuneration Band Number of Employees in Band 2024/25 1 £55,000 - £59,999 1 0 £60,000 - £64,999 0 0 £65,000 - £69,999 0 0 £70,000 - £74,999 0 0 £75,000 - £79,999 0 Exit Packages The IJB did not support nor did it direct to be supported by its partners, any exit packages during 2024/25 (2023/24: nil). Page 32 of 86
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27 Val de Souza, IJB Chair. Morag Barrow, Chief Officer. Page 33 of 86
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28 Annual Governance Statement 2024/25 Introduction The Annual Governance Statement explains our governance arrangements and systems of internal control and reports on their effectiveness. Scope of Responsibility We are responsible for ensuring that our business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for and used economically, efficiently and effectively. To do this we have established arrangements for governance which includes a system of internal control. The system is intended to manage risk to support the achievement of our policies, aims and objectives. Reliance is also placed on NHS Lothian and Midlothian Council’s (the partners) systems of internal control that support compliance with both organisations’ policies and promotes achievement of each organisation’s aims and objectives, as well as ours. The system can only provide reasonable and not absolute assurance of effectiveness. The Governance Framework and Internal Control System The IJB Board comprises voting members, nominated by either NHS Lothian or Midlothian Council, as well as non-voting members including a Chief Officer appointed by the Board. Our current Local Code of Corporate Governance (Local Code), which was approved by the Board on 8 April 2021, sets out the framework and key principles of effective governance. The Local Code is consistent with the principles and recommendations of the Chartered institute of Public Finance and Accountancy (CIPFA) and Society of Local Authority Chief Executives and Senior Managers (SOLACE) Framework ‘Delivering Good Governance in Local Government’ (2016) and the supporting guidance notes for Scottish authorities. It ensures that resources are directed in accordance with agreed policy and priorities; there is sound and inclusive decision making; and there is clear accountability for the use of those resources to achieve desired outcomes for people and communities. The main features of the governance framework and internal control system associated with the seven core principles of good governance defined in the Local Code in existence during 2024/25 included: Behaving with integrity, demonstrating strong commitment to ethical values, and respecting rule of law The roles and responsibilities of Board members and statutory officers and the processes to govern the conduct of the Board’s business are defined in the Scheme of Integration which was approved by the Board and NHS Lothian in June 2022, which serves as the approved constitution, and Standing Orders, a Page 34 of 86
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29 revision of which was approved by the Board in February 2023, to make sure that public business is conducted with fairness and integrity. The Ethical Standards in Public Life (Scotland) Act 2000 provides for Codes of Conduct for local authority councillors and members of relevant public bodies. As a Public Body listed in schedule 3 of the Act, we are required to produce a Code of Conduct, which was approved by the Board in April 2022, continued adherence to this Code of Conduct provides appropriate assurance against this principle. We are dependent upon arrangements within the partner organisations for: ensuring legal compliance in the operation of services; handling complaints; training on ethical awareness and whistleblowing policies and procedures; appointing and appraising staff – taking into account of values and ethical behaviour; identifying, mitigating and recording conflicts of interest, hospitality and gifts; and procuring goods and services which are sustainable, represent value of money and which reinforce ethical values. Other areas where we place significant reliance on arrangements in place within the partner organisations are set out in this governance statement. The Chief Officer is responsible for ensuring that agreed procedures are followed and that all applicable statutes and regulations are complied with. Professional advice on the discharge of duties is provided to the Board by our Chief Officer supported by Chief Financial Officer, Chief Internal Auditor and Board Clerk as appropriate. Ensuring openness and comprehensive stakeholder engagement Board meetings are held in public unless there are good reasons for not doing so on the grounds of confidentiality. Board papers are available to the public on the Council website. Unless confidential, decisions made by the Board are made available on the Midlothian Health and Social Care Website The Scheme of Integration and our Strategic Plan were developed through a range of consultation and engagement activities including statutory consultation. In determining how services and other courses of action should be planned and delivered, we have a statutory responsibility to involve people who experience our services and members of the public. Page 35 of 86
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30 Our Strategic Plan is based on both routine engagement and statutory consultation. The statutory consultation plan for our draft Strategic Plan was approved on 20th June 2024. Substantial stakeholder consultation has already been completed in the development of the draft Midlothian IJB Strategic Plan 2025-2035. We have issued Directions to our partners, most recently on 28th March 2025 for 2025/26 Directions for service delivery and for service redesign and recommissioning in line with the transformation programme. Our Strategic Planning Group is reviewing our Public Engagement Statement and the Community Engagement Self-Assessment and Action plan. Our complaints procedure was established in 2017. This procedure is currently being reviewed and will be considered by the Audit and Risk Committee ahead of recommendation to the board for approval. Defining outcomes in terms of sustainable economic, social, and environmental benefits Each of the strategic aims support at least one of the 9 National Health and Wellbeing outcomes and our Directions for 2025/26 are structured this way too. We have intentionally designed our planning this way to help people see how our ambitions for change are linked to the way we make decisions about funding and the action we ask our Partners to take. As we continue to work towards people achieving what matters most to them, it is important that we understand what our contribution is to that process. To do this, we have not simply taken old processes and made them electronic, we have adopted a new way to describe how we are making an impact in Midlothian. This is called Outcome Mapping. We began developing our approach in 2021/22 with a framework that describes how we work with people and communities to improve outcomes. Based on this learning, we have continually improved the process over the last three years with a common approach for services to tell their story and describe the contribution we make to changing outcomes. We have chosen to further develop our whole-system approach using a Strategic Governance Outcome Map. This map describes how the IJB operates and can give assurance on the progress we are making towards our three strategic aims and the 9 National Health and Wellbeing Outcomes. Storytelling and the stories of the people who experience our services are an important part of showing and evidencing how people feel and the difference we have helped make in their lives. This information is also very useful to help us learn. continually improve and share this with our Partners. Determining the interventions necessary to optimise the achievement of the intended outcomes The vision, strategic objectives and outcomes in our Strategic Plan 2022-25 were approved in April 2022 and have been updated to reflect ongoing assessment of Page 36 of 86
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31 need and priorities following public consultation. Implementation is underpinned by the associated Directions, on which progress reports are presented to the Board. The process of developing the 2025-2035 strategic plan has been underway since August 2023 and a draft plan is progressing through the governance route of both partners ahead of publication, currently planned for October 2025. Where it makes sense to do so, our (draft) Strategic Plan 2025-2035 explores ways to create opportunities to have shared goals and outcomes, jointly fund services, and share our data. For example, services like mental health, substance use, primary care, housing, employability, and welfare support can all contribute to preventing some of the causes of poor or deteriorating mental health. We must avoid limiting what we can do with unnecessary ‘red tape’ while also meeting our duties to keep people safe. Where people live can have a significant impact on health and health inequalities. An emerging threat to heath and health inequalities is climate change. We have a duty to report on how we are working with our Partners in this regard, and we must find the shared opportunities within all our strategies to underpin the principles of equality, net zero emissions, and sustainability. We will continue to support ‘Green Health Prescribing’ and work with others to ensure the health and social care needs of people are considered as part of proposed local development plans. Implications are considered during the decision-making process within the standard report template covering Policy, Equalities, Resources, Risk, and Involving People Developing the entity’s capacity, including the capability of its leadership and the individuals within it Our Chief Officer is responsible and accountable to the Board for all aspects of management including promoting sound governance and providing quality information/support to inform decision-making and scrutiny. Regular meetings are held between the Chief Officer and the Chair and Vice Chair of the IJB. Our Chief Officer also meets regularly with representatives from the partner organisations. Members of the IJB Board can attend Development Sessions relevant to their role as part of their development programme. We have also undertaken a Self- Assessment first completed in August 2023 with an improvement plan being approved. We reviewed this plan in April 2025 with formal approval due from the IJB Board. We approved a 3-year Integrated Workforce Plan 2025-28 in February 2025 to allow delivery to the Scottish Government in March 2025. This is aligned to our medium-term financial strategy and supports the delivery of our Strategic Plan 2025-2035. We are waiting for feedback from Scottish Government and will then agree an improvement plan and a publication date. Page 37 of 86
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32 Managing risks & performance through robust internal control & strong public financial management Our Chief Officer has overall responsibility for directing and controlling the partnership to deliver health and social care services. The IJB Board is responsible for key decision-making. We have approved a Risk Management Strategy which includes: the reporting structure; types of risks to be reported; risk management framework and process; roles and responsibilities; and monitoring risk management activity and performance. This Strategy has been updated and presented to the June 2024 Audit & Risk Committee with the Risk Management Policy being approved by the IJB Board in October 2024. Regular risk reporting is completed by our Audit & Risk Committee. Our Chief Financial Officer is responsible for the proper administration of all aspects of our financial affairs including ensuring advice is given to the Board on all financial matters. Our system of internal financial control is dependent upon the framework of financial regulations, regular management information (including Revenue Budget Monitoring reports to the Board), administrative procedures (including segregation of duties), management supervision and systems of delegation and accountability within the partner organisations. The MIJB also relies upon the partners for: o Counter fraud and anti-corruption arrangements (whose arrangements are in accordance with the Code of Practice on Managing the Risk of Fraud and Corruption); and o Management of data in accordance with applicable legislation. Implementing good practices in transparency, reporting, and audit to deliver effective accountability The Shared Chief Internal Auditor of Midlothian Council is the IJB’s Chief Internal Auditor whose role is to provide an independent and objective annual opinion on the effectiveness of the IJB’s internal controls, risk management and governance. This is carried out in conformance with the Public Sector Internal Audit Standards. We respond to the findings and recommendations of Internal Audit, External Audit, Scrutiny and Inspection bodies. Our Audit and Risk Committee is integral to overseeing assurance and monitoring improvements in internal controls, risk management and governance. Our Audit & Risk Committee updated the terms of reference in June 2024 and have recruited an independent member in line with CIPFA best practice. Performance Reports were presented to the Board for monitoring and control of achievement of Local Improvement Goals. An Annual Performance Report for 2023/24 was presented to the IJB Board for review prior to publication in October 2024. Page 38 of 86
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33 The Annual Accounts and Report for 2024/25 will set out the financial position in accordance with relevant accounting regulations and is being prepared. Review of Adequacy and Effectiveness We are required to conduct an annual review of the effectiveness of our governance framework. The review was informed by: Annual self-assessment carried out by Internal Audit against our Local Code of Corporate Governance; Internal Audit reports; External Audit reports; Relevant reports by other external scrutiny bodies and inspection agencies; Relevant partners’ (NHS Lothian and Midlothian Council) Internal Audit and External Audit reports. There have been developments in all 3 improvement areas of governance identified by the IJB in 2023/24. Our Strategic Plan and the Medium-Term Financial Strategy continue to be developed to include a more explicit link, however this work remains ongoing including the development of the new strategic plan during the year, Governance processes to manage the monitoring of financial recovery plans have been put in place, closing all internal audit recommendations in this area Reporting to the IJB Board commenced in February 2025, our Publication scheme improvements closing all Internal Audit recommendations were completed in October 2024. We agreed a Directions Policy on 20th February 2025 alongside the process for linking the Directions Log and the HSCP Service Plans. Improvement Areas of Governance The review identified areas where further improvement in governance arrangements can be made: 1 The Medium-Term Financial Strategy should be developed to include a more explicit link to our Strategic Plan. 2 Our Medium Term Financial Plan presented to the MIJB Board in October 2024 highlighted that the starting financial pressure for the 2025/26 financial year was £11.33 million with the overall financial pressure from 2025/26 to 2029/30 being £77.633 million, by February 2025 the starting pressure for 2025/26 had increased to £13.2million. In presenting a budget setting paper in March 2025 both partners had either offered or indicated increases of 11% for the 2025/26 IJB funding leaving a £6.835million financial pressure remaining. Application of Operational and Strategic redesign recovery actions of £5.801million resulted in a remaining unbalanced budget position of £1.034 million with a reported expectation that sustainability funding for NHS Lothian would allow the setting of a Balance budget. The reliance on continued recovery plan savings and significant increases in partner budget support continues to highlight the significant financial position risks for the IJB. Maintaining financial reporting of achievement of recovery actions, as Page 39 of 86
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34 well as overall budget position throughout the year will continue to be vital for the Board. 3 The IJB retains no General Reserve and with the current financial position this creates further financial risk a review of the IJB Reserve policy is required and underway during the 2025/26 financial year. The implementation of these actions to enhance the governance arrangements in 2025/26 will be driven and monitored by our Chief Officer to inform the next annual review. Internal Audit work planned in 2025/26 will test improvements and compliance in governance. Conclusion and Opinion on Assurance It is our opinion that reasonable assurance can be placed upon the adequacy and effectiveness of our governance arrangements and system of internal control, while recognising that further improvements are required to fully demonstrate compliance with the Local Code of Corporate Governance for the IJB to fully meet its principal objectives. Systems are in place to regularly review and improve governance arrangements and the system of internal control Val de Souza, Chair Morag Barrow, Chief Officer Page 40 of 86
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35 Independent Auditor’s Report Independent auditor’s report to the members of Midlothian Integration Joint Board and the Accounts Commission Reporting on the audit of the financial statements Opinion on financial statements I certify that I have audited the financial statements in the annual accounts of Midlothian Integration Joint Board for the year ended 31 March 2025 under Part VII of the Local Government (Scotland) Act 1973. The financial statements comprise the Comprehensive Income and Expenditure Statement, Movement in Reserves Statement, Balance Sheet and notes to the financial statements, including material accounting policy information. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards, as interpreted and adapted by the Code of Practice on Local Authority Accounting in the United Kingdom 2024/25 (the 2024/25 Code). In my opinion the accompanying financial statements: give a true and fair view of the state of affairs of the Midlothian Integration Joint Board as at 31 March 2025 and of its income and expenditure for the year then ended; have been properly prepared in accordance with UK adopted international accounting standards, as interpreted and adapted by the 2024/25 Code; and have been prepared in accordance with the requirements of the Local Government (Scotland) Act 1973, The Local Authority Accounts (Scotland) Regulations 2014, and the Local Government in Scotland Act 2003. Basis for opinion I conducted my audit in accordance with applicable law and International Standards on Auditing (UK) (ISAs (UK)), as required by the Code of Audit Practice approved by the Accounts Commission for Scotland. My responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of my report. I was appointed by the Accounts Commission on 5 June 2023. My period of appointment is five years, covering 2022/23 to 2026/27. I am independent of the Midlothian Integration Joint Board in accordance with the ethical requirements that are relevant to my audit of the financial statements in the UK including the Financial Reporting Council’s Ethical Standard, and I have fulfilled my other ethical responsibilities in accordance with these requirements. Non-audit services prohibited by the Ethical Standard was not provided to the Midlothian Integration Joint Board. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Page 41 of 86
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36 Conclusions relating to going concern basis of accounting I have concluded that the use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Based on the work I have performed, I have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Midlothian Integration Joint Board’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from when the financial statements are authorised for issue. These conclusions are not intended to, nor do they, provide assurance on the Midlothian Integration Joint Board’s current or future financial sustainability. However, I report on the Midlothian Integration Joint Board’s arrangements for financial sustainability in a separate Annual Audit Report available from the Audit Scotland website. Risks of material misstatement I report in my Annual Audit Report the most significant assessed risks of material misstatement that I identified and my judgements thereon. Responsibilities of the Interim Chief Finance Officer and the Audit and Risk Committee for the financial statements As explained more fully in the Statement of Responsibilities, the Interim Chief Finance Officer is responsible for the preparation of financial statements that give a true and fair view in accordance with the financial reporting framework, and for such internal control as the Interim Chief Finance Officer determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Interim Chief Finance Officer is responsible for assessing the Midlothian Integration Joint Board’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless there is an intention to discontinue the Midlothian Integration Joint Board’s operations. The Audit and Risk Committee is responsible for overseeing the financial reporting process. Auditor’s responsibilities for the audit of the financial statements My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. I design procedures in line with my responsibilities outlined above to Page 42 of 86
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37 detect material misstatements in respect of irregularities, including fraud. Procedures include: using my understanding of the local government sector to identify that the Local Government (Scotland) Act 1973, The Local Authority Accounts (Scotland) Regulations 2014, and the Local Government in Scotland Act 2003 are significant in the context of the Midlothian Integration Joint Board; inquiring of the Interim Chief Finance Officer as to other laws or regulations that may be expected to have a fundamental effect on the operations of the Midlothian Integration Joint Board; inquiring of the Interim Chief Finance Officer concerning the Midlothian Integration Joint Board’s policies and procedures regarding compliance with the applicable legal and regulatory framework; discussions among my audit team on the susceptibility of the financial statements to material misstatement, including how fraud might occur; and considering whether the audit team collectively has the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. The extent to which my procedures are capable of detecting irregularities, including fraud, is affected by the inherent difficulty in detecting irregularities, the effectiveness of the Midlothian Integration Joint Board’s controls, and the nature, timing and extent of the audit procedures performed. Irregularities that result from fraud are inherently more difficult to detect than irregularities that result from error as fraud may involve collusion, intentional omissions, misrepresentations, or the override of internal control. The capability of the audit to detect fraud and other irregularities depends on factors such as the skilfulness of the perpetrator, the frequency and extent of manipulation, the degree of collusion involved, the relative size of individual amounts manipulated, and the seniority of those individuals involved. A further description of the auditor’s responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website www.frc.org.uk/auditorsresponsibilities. This description forms part of my auditor’s report. Reporting on other requirements Opinion prescribed by the Accounts Commission on the audited parts of the Remuneration Report I have audited the parts of the Remuneration Report described as audited. In my opinion, the audited parts of the Remuneration Report have been properly prepared in accordance with The Local Authority Accounts (Scotland) Regulations 2014. Other information The Interim Chief Finance Officer is responsible for the other information in the annual accounts. The other information comprises the Management Commentary, Annual Page 43 of 86
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38 Governance Statement, Statement of Responsibilities and the unaudited part of the Remuneration Report. My responsibility is to read all the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If I identify such material inconsistencies or apparent material misstatements, I am required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work I have performed, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard. My opinion on the financial statements does not cover the other information and I do not express any form of assurance conclusion thereon except on the Management Commentary and Annual Governance Statement to the extent explicitly stated in the following opinions prescribed by the Accounts Commission. Opinions prescribed by the Accounts Commission on the Management Commentary and Annual Governance Statement In my opinion, based on the work undertaken in the course of the audit: the information given in the Management Commentary for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with statutory guidance issued under the Local Government in Scotland Act 2003; and the information given in the Annual Governance Statement for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with the Delivering Good Governance in Local Government: Framework (2016). Matters on which I am required to report by exception I am required by the Accounts Commission to report to you if, in my opinion: adequate accounting records have not been kept; or the financial statements and the audited part of the Remuneration Report are not in agreement with the accounting records; or I have not received all the information and explanations I require for my audit. I have nothing to report in respect of these matters. Conclusions on wider scope responsibilities In addition to my responsibilities for the annual accounts, my conclusions on the wider scope responsibilities specified in the Code of Audit Practice, including those in respect of Best Value, are set out in my Annual Audit Report. Use of my report This report is made solely to the parties to whom it is addressed in accordance with Part VII of the Local Government (Scotland) Act 1973 and for no other purpose. In accordance with paragraph 108 of the Code of Audit Practice, I do not undertake to Page 44 of 86
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39 have responsibilities to members or officers, in their individual capacities, or to third parties. Claire Gardiner, CFPA Audit Director Audit Scotland 4th Floor 102 West Port Edinburgh EH3 9DN Page 45 of 86
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40 Comprehensive Income and Expenditure Statement This statement shows the cost of providing services for the year according to accepted accounting practices. IJB Comprehensive Income and Expenditure Statement Income/Expenditure 2023/24 Net Expenditure £000’s 2024/25 Net Expenditure £000’s Health Care Services - NHS Lothian £132,906 £135,018 Social Care Services - Midlothian Council £66,036 £69,483 Cost of Services £198,942 £204,501 Taxation and Non-Specific Grant Income (£186,584) (£204,650) Surplus/(deficit) on Provision of Services (£12,358) £149 The Integration scheme lays out that the partners will provide corporate and other support to the IJB as required and will not charge for these services. These costs are not, therefore, included. Page 46 of 86
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41 Movement in Reserves Statement The movement in reserves statement shows the value of the IJB’s reserve and how this has changed during 2024/25. Movements in Reserves during 2024/25 IJB Reserves Earmarked Reserves £000's General Reserves £000's Total Reserves £000's Opening Balance - 31/3/2024 £799 £0 £799 Drawdown of Reserve in year (£792) £0 (£792) Additions to Reserve in year £941 £0 £941 Closing Balance - 31/3/2025 £948 £0 £948 Movements in Reserves during 2023/24 IJB Reserves Earmarked Reserves £000's General Reserves £000's Total Reserves £000's Opening Balance - 31/3/2023 £6,975 £6,182 £13,157 Drawdown of Reserve in year (£6,176) (£6,182) (£12,358) Additions to Reserve in year £0 £0 £0 Closing Balance - 31/3/2024 £799 £0 £799 Page 47 of 86
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42 Balance Sheet The Balance Sheet shows the value of the IJB’s assets and liabilities as at the balance sheet date. The net assets (assets less liabilities) of the IJB are matched by the reserves held by the IJB. IJB Balance Sheet 31 March 2024 £000’s 31 March 2025 £000’s Notes Net Current Assets Debtors £799 £948 7 Creditors: amounts falling due within one year £0 £0 Total assets less current liabilities £799 £948 Net Liabilities Earmarked Reserve £799 £948 1 General Reserve £0 £0 1 Total Reserves £799 £948 The audited accounts were authorised for issue on Chris King, Interim Chief Finance Officer. Page 48 of 86
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43 Notes to the Financial Statements 1 Significant Accounting Policies General Principles The Financial Statements summarise the IJB’s transactions for the 2024/25 financial year and its position at the year-end of 31 March 2025. The IJB was established under the requirements of the Public Bodies (Joint Working) (Scotland) Act 2014 and is a Section 106 body as defined in the Local Government (Scotland) Act 1973. The Financial Statements are prepared in compliance with the Code of Practice on Local Authority Accounting in the United Kingdom 2024/25, supported by International Financial Reporting Standards (IFRS), unless legislation or statutory guidance requires different treatment. The accounts are prepared on a going concern basis, which assumes that the IJB will continue in operational existence for the foreseeable future. The historical cost convention has been adopted. Basis of Preparation The IJB financial statements for 2024/25 have been prepared on a going concern basis. The IJB was established under the requirements of the Public Bodies (Joint Working) (Scotland) Act 2014 and is a Section 106 body as defined in the Local Government (Scotland) Act 1973. In accordance with the CIPFA Code of Local Government Accounting (2024/25), the IJB is required to prepare its financial statements on a going concern basis unless informed by the relevant national body of the intention for dissolution without transfer of services or function to another entity. The accounts are prepared on the assumption that the IJB will continue in operational existence for the foreseeable future. The IJB’s funding from and commissioning of services to partners has been confirmed for 2025/26, and a medium-term financial plan has been prepared through to 2028. Given that the IJB is wholly funded by the partners and the IJB’s Integration Scheme commits the partners to funding any overspend within the IJB I consider that there are no material uncertainties around its going concern status. Accruals of Income and Expenditure Activity is accounted for in the year that it takes place, not simply when settlement in cash occurs. In particular: Expenditure is recognised when goods or services are received, and their benefits are used by the IJB Income is recognised when the IJB has a right to the income, for instance by meeting any terms and conditions required to earn the income, and receipt of the income is probable Page 49 of 86
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44 Where income and expenditure have been recognised but settlement in cash has not taken place, a debtor or creditor is recorded in the Balance Sheet Where debts may not be received, the balance of debtors is written down Funding The IJB is wholly funded through funding contributions from the statutory funding partners, Midlothian Council and NHS Lothian. Expenditure is incurred in the form of net charges by the partners to the IJB. Cash and Cash Equivalents The IJB does not operate a bank account or hold cash. Transactions are settled on behalf of the IJB by the funding partners. Consequently, the IJB does not present a ‘Cash and Cash Equivalent’ figure on the balance sheet. Debtors and Creditors The funding balance due to or from each funding partner as at 31st of March is represented as a debtor or creditor on the IJB’s Balance Sheet. Where income and expenditure have been recognised but settlement in cash has not taken place, a debtor or creditor is recorded in the Balance Sheet. Employee Benefits The IJB does not directly employ staff. Staff are formally employed by the partners who retain the liability for pension benefits payable in the future. The IJB therefore does not present a Pensions Liability on its Balance Sheet. The IJB has a legal responsibility to appoint a Chief Officer. More details on the arrangements are provided in the Remuneration Report. Provisions, Contingent Liabilities and Contingent Assets Provisions are liabilities of uncertain timing or amount. A provision is recognised as a liability on the balance sheet when there is an obligation as at 31st of March due to a past event; settlement of the obligation is probable; and a reliable estimate of the amount can be made. Recognition of a provision will result in expenditure being charged to the Comprehensive Income and Expenditure Statement and will normally be a charge to the General Fund. A contingent liability is a possible liability arising from events on or before 31st of March, whose existence will only be confirmed by later events. A provision that cannot be reasonably estimated, or where settlement is not probable, is treated as a contingent liability. A contingent liability is not recognised in the IJB’s Balance Sheet but is disclosed in a note where it is material. A contingent asset is a possible asset arising from events on or before 31st of March, whose existence will only be confirmed by later events. A contingent asset is not recognised in the IJB’s Balance Sheet but is disclosed in a note only if it is probable to arise and can be reliably measured. Page 50 of 86
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45 The IJB has none of the above. Reserves The IJB’s reserves are classified as either Usable or Unusable Reserves. The IJB’s only Usable Reserve is the General Fund. The balance of the General Fund as at 31 March shows the extent of resources which the IJB can use in later years to support service provision. As noted above, the IJB has reserves of £948,000 on 31 March 2025. IJB Usable Reserve Reserves 2023/24 Closing Balance £000’s 2024/25 Closing Balance £000’s Embedding a gender informed effective response to domestic abuse Project £27 £7 Unscheduled Care £0 £941 Carers Act £391 £0 Primrose Lodge £286 £0 Sexual Health £35 £0 Learning Disability Checks £60 £0 General Reserves £0 £0 Total £799 £948 Indemnity Insurance The IJB has indemnity insurance for costs relating primarily to potential claim liabilities regarding Board member and officer responsibilities. NHS Lothian and Midlothian Council have responsibility for claims in respect of the services that they are statutorily responsible for and that they provide. The IJB holds separate indemnity insurance through its membership of the Clinical Negligence and Other Risks Indemnity Scheme (CNORIS) scheme, the charge for this in 2024/25 was £3,000 (PY £3,000). Unlike NHS Boards, the IJB does not have any ‘shared risk’ exposure from participation in CNORIS. The IJB participation in the CNORIS scheme is therefore analogous to normal insurance arrangements. Known claims are assessed as to the value and probability of settlement. Where it is material the overall expected value of known claims taking probability of settlement into consideration is provided for in the IJB’s Balance Sheet. The likelihood of receipt of an insurance settlement to cover any claims is separately assessed and, where material, presented as either a debtor or disclosed as a contingent asset. Page 51 of 86
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46 There are no outstanding claims or any indications that any claims are to be made against the IJB. 2 Accounting Standards that have been Issued but have not yet been Adopted The Code requires the disclosure of information relating to the impact of an accounting change that will be required by a new standard that has been issued but not yet adopted and could have a material impact on the accounts. This applies to new or amended standards within the 2024/25 Code. There are no new or amended Accounting Standards issued but not yet adopted that will have a material impact on the 2024/25 Annual Accounts. Page 52 of 86
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47 3 Critical Judgements and Estimation Uncertainty The critical judgements made in the Financial Statements relating to complex transactions are: The partner organisations have considered their exposure to possible losses and made adequate provision where it is probable that an outflow of resources will be required, and the amount of the obligation can be measured reliably. Where it has not been possible to measure the obligation, or it is not probable in the partner organisations’ options that a transfer of economic benefits will be required, material contingent liabilities have been disclosed (there are none). The Annual Accounts contains estimated figures that are based on assumptions made by the IJB about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. There are no items in the IJB’s Balance Sheet at 31 March 2025 for which there is a significant risk of material adjustment in the forthcoming financial year. Provisions The IJB has not created any provisions in respect of compensation claims. It is not certain that all claims have been identified or that the historic level of settlement payments is a reliable guide for future settlements. 4 Subsequent Events In accordance with the requirements of International Accounting Standards 10, events after the reporting period are considered up to the date on which the accounts are authorised for issue. This is interpreted as the date that the accounts were certified by the Chief Financial Officer following approval by the Audit and Risk Committee. Events after the Balance Sheet date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Annual Accounts are authorised for issue. Two types of events can be identified. • Adjusting events: Those that provide evidence of conditions that existed at the end of the reporting period. The Annual Accounts is adjusted to reflect such events. • Non-adjusting events: Those that are indicative of conditions that arose after the reporting period and the Statements are not adjusted to reflect such events. Where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect. Page 53 of 86
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48 5 Expenditure and Funding Analysis Income and Expenditure 2024/25 Services specifically for Midlothian 2023/24 £000’s 2024/25 £000’s Health £79,694 £83,878 Social Care £66,036 £69,483 Midlothian’s share of Lothian Health Services (Hosted) £28,884 £30,412 Midlothian’s share of Lothian Health Services (Set Aside) £24,328 £20,728 Total £198,942 £204,501 Funded by: Midlothian Council £57,416 £69,072 Funded by: NHS Lothian £129,168 £135,578 Total Funding £186,584 £204,650 Surplus/(Deficit) (£12,358) £149 Expenditure above has been split into three main areas: Services delivered specifically for the population of Midlothian. These services are managed locally by the Midlothian Partnership – shown under Health and Social Care. Hosted Services – these are health services managed either by the Edinburgh, East Lothian and West Lothian Partnerships or managed by NHS Lothian on a pan-Lothian basis. These services included Mental Health Services, Learning Disability Services, Substance Misuse Services, Rehabilitation services, General Dental Services, General Pharmaceutical Services and General Ophthalmic Services. This is the IJB’s agreed share of these services. Set Aside Services – these are services delivered in the main acute hospitals (Royal Infirmary of Edinburgh, Western General Hospital and St. John’s Hospital) and managed by NHS Lothian. This is the IJB’s agreed share of these services. 6 Corporate Service Included in the above costs are the following corporate services IJB Corporate Costs 2023/24 £000’s 2024/25 £000’s Staff (Chief Officer) £56 £59 CNORIS £3 £3 Audit Fee £33 £34 Total £92 £96 As noted above, the Chief Finance Officer is not charged to the IJB. Page 54 of 86
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49 7 Related Party Transactions Related parties are organisations the IJB can control or influence or who can control or influence the IJB. As Partners in the Joint Venture of Midlothian IJB, both Midlothian Council and NHS Lothian are related parties and material transactions with those bodies are shown in line with the requirements of IAS 24 Related Party Disclosures. There are elements of expenditure which are shown against NHS Lothian above but where the resources are used for the Social Care services delivered by Midlothian Council, in particular these include resource transfer and social care funds. In the 2024/25 financial year the following transactions were made with NHS Lothian and Midlothian Council relating to integrated health and social care functions. Income: Payments for integrated functions 2023/24 £000’s 2024/25 £000’s NHS Lothian £129,168 £135,578 Social Care £57,416 £69,072 Total £186,584 £204,650 Expenditure: Payments for delivery of integrated functions 2023/24 £000’s 2024/25 £000’s NHS Lothian £132,906 £135,018 Social Care £66,036 £69,483 Total £198,942 £204,501 In addition, a range of support services are provided to the IJB by each partner organisation. These functions are not formally delegated under the integration scheme; however, they remain essential to maintaining the IJB’s operational infrastructure. Such services include, but are not limited to, Human Resources, Information Technology, and other corporate support functions. Page 55 of 86
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50 8 Short Term Debtors Owed to the IJB at 31 March 2025 2023/24 £000’s 2024/25 £000’s Funding due from NHS Lothian £381 £941 Funding due from Midlothian Council £418 £7 Total £799 £948 9 VAT The IJB is not VAT registered. The VAT treatment of expenditure in the IJB’s accounts depends on which of the Partner agencies is providing the service as these agencies are treated differently for VAT purposes. Where the Council is the provider, income and expenditure excluded any amounts related to VAT, as all VAT collected is payable to H.M. Revenue & Customs and all VAT paid is recoverable from it. The Council is not entitled to fully recover VAT paid on a very limited number of items of expenditure and for these items the cost of VAT paid is included within service expenditure to the extent that it is irrecoverable from H.M. Revenue and Customs. Where the NHS is the provider, expenditure incurred will include irrecoverable VAT as generally the NHS cannot recover VAT paid as input tax and will seek to recover its full cost as income from the Commissioning IJB. Page 56 of 86
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Midlothian Integration Joint Board Draft 2024/25 Annual Audit Report Prepared for Midlothian Integration Joint Board and the Controller of Audit September 2025 Page 57 of 86
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Midlothian Integration Joint Board: Draft 2024/25 Annual Audit Report | 2 Contents Key messages 3 Introduction 4 Audit scope and responsibilities 5 Audit of the annual accounts 7 Wider scope and Best Value audit 11 Appendix 1 18 Appendix 2 23 Accessibility You can find out more and read this report using assistive technology on our website www.audit.scot/accessibility. Page 58 of 86
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Key messages | 3 Key messages Audit of the annual accounts 1 All audit opinions stated that the annual accounts were free from material misstatement. 2 There were no material adjustments required to correct the financial statements. Wider scope and Best Value audit 3 Midlothian IJB reported a surplus of £0.15 million in its service provision for 2024/25. However, additional funding of £7.83 million was provided in year to meet operational overspends. 4 The scale of the financial challenges Midlothian IJB is facing remains significant, with future funding gaps posing serious risks to the sustainability of health and social care services 5 The audit work performed on the arrangements the body has in place for Vision, Leadership and Governance found that these were appropriate. 6 Governance arrangements remain appropriate and support effective scrutiny, challenge and informed decision making. 7 Midlothian IJB has effective arrangements for managing and reporting performance. 8 Arrangements to secure Best Value are developing with a framework expected in 2025/26. Page 59 of 86
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Introduction | 4 Introduction Purpose of the Annual Audit Report 1. The purpose of this Annual Audit Report is to report the significant matters identified from the 2024/25 audit of Midlothian Integration Joint Board’s annual accounts and the wider scope areas specified in the Code of Audit Practice. 2. The Annual Audit Report is addressed to Midlothian Integration Joint Board, hereafter referred to as ‘Midlothian IJB’, and the Controller of Audit and will be published on Audit Scotland’s website in due course. Appointed auditor and independence 3. Claire Gardiner, of Audit Scotland, has been appointed as external auditor of Midlothian IJB for the period from 2022/23 until 2026/27. As reported in the Annual Audit Plan, Claire Gardiner and the audit team are independent of Midlothian IJB in accordance with relevant ethical requirements, including the Financial Reporting Council’s Ethical Standard. There have been no developments since the issue of the Annual Audit Plan that impact on the continued independence of the engagement lead or the rest of the audit team from Midlothian IJB, including no provision of non-audit services. Acknowledgements 4. We would like to thank Midlothian IJB and its staff, particularly those involved in preparation of the annual accounts, for their cooperation and assistance during the audit. We look forward to working together constructively over the remainder of the five-year audit appointment. Page 60 of 86
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Audit scope and responsibilities | 5 Audit scope and responsibilities Scope of the audit 5. The audit is performed in accordance with the Code of Audit Practice, including supplementary guidance, International Standards on Auditing (ISA) (UK), and relevant legislation. These set out the requirements for the scope of the audit which includes: • An audit of the financial statements and an opinion on whether they give a true and fair view and are free from material misstatement. • An opinion on statutory other information published with the financial statements in the annual accounts, namely the Management Commentary and Annual Governance Statement. • An opinion on the audited part of the Remuneration Report. • Conclusions on Midlothian IJB’s arrangements in relation to the wider scope areas: Financial Management; Financial Sustainability; Vision, Leadership and Governance; and Use of Resources to Improve Outcomes. • Reporting on Midlothian IJB’s arrangements for securing Best Value. • Provision of this Annual Audit Report. Responsibilities and reporting 6. The Code of Audit Practice sets out the respective responsibilities of Midlothian IJB and the auditor. A summary of the key responsibilities is outlined below. Auditor’s responsibilities 7. The responsibilities of auditors in the public sector are established in the Local Government (Scotland) Act 1973. These include providing an independent opinion on the financial statements and other information reported within the annual accounts and concluding on Midlothian IJB’s arrangements in place for the wider scope areas and Best Value. 8. The matters reported in the Annual Audit Report are only those that have been identified by the audit team during normal audit work and may not be all that exist. Communicating these does not absolve Midlothian IJB from its responsibilities outlined below. Page 61 of 86
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Audit scope and responsibilities | 6 Midlothian IJB’s responsibilities 9. Midlothian IJB has primary responsibility for ensuring proper financial stewardship of public funds, compliance with relevant legislation and establishing effective arrangements for governance, propriety, and regularity that enables it to successfully deliver its objectives. The features of proper financial stewardship include: • Establishing arrangements to ensure the proper conduct of its affairs. • Preparation of annual accounts, comprising financial statements for Midlothian IJB that gives a true and fair view and other specified information. • Establishing arrangements for the prevention and detection of fraud, error and irregularities, and bribery and corruption. • Implementing arrangements to ensure its financial position is soundly based. • Making arrangements to secure Best Value. • Establishing an internal audit function. National performance audit reporting 10. The Auditor General for Scotland and the Accounts Commission regularly publish performance audit reports. These cover a range of matters, many of which may be of interest to Midlothian IJB and the Audit, Risk & Governance Committee. Details of national and performance audit reports published over the last year can be seen in Appendix 2. Page 62 of 86
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Audit of the annual accounts | 7 Audit of the annual accounts Main judgements All audit opinions stated that the annual accounts were free from material misstatement. There were no material adjustments required to correct the financial statements. Audit opinions on the annual accounts 11. Midlothian IJB’s annual accounts were approved by the Board on the 18 September 2025 and certified by the appointed auditor on the same date. The Independent Auditor’s Report is included in Midlothian IJB’s annual accounts, and this reports that, in the appointed auditor’s opinion, these were free from material misstatement. Audit timetable 12. The unaudited annual accounts and all working papers were received on 30 June 2025 in accordance with the agreed audit timetable. Audit Fee 13. The audit fee for the 2024/25 audit was reported in the Annual Audit Plan and was set at £34,000. There have been no developments that impact on planned audit work required, therefore the audit fee reported in the Annual Audit Plan remains unchanged. Materiality 14. Materiality is applied by auditors in planning and performing an audit, and in evaluating the effect of any uncorrected misstatements on the financial statements or other information reported in the annual accounts. 15. The concept of materiality is to determine whether misstatements identified during the audit could reasonably be expected to influence the decisions of users of the annual accounts. Auditors set a monetary threshold when determining materiality, although some issues may be considered material by their nature. Therefore, materiality is ultimately a matter of the auditor’s professional judgement. Page 63 of 86
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Audit of the annual accounts | 8 16. Materiality levels for the audit of Midlothian IJB were determined at the risk assessment phase of the audit and were reported in the Annual Audit Plan, which also reported the judgements made in determining materiality levels. These were updated on receipt of the unaudited annual accounts as shown in Exhibit 1. Exhibit 1 2024/25 Materiality levels for Midlothian IJB Materiality Midlothian IJB Materiality – set at 2% of gross expenditure. £4.09 million Performance materiality – set at 70% of materiality. As outlined in the Annual Audit Plan, this acts as a trigger point. If the aggregate of misstatements identified during the audit exceeds performance materiality, this could indicate further audit procedures are required. £2.86 million Reporting threshold – set at 5% of materiality. £0.20 million Source: Audit Scotland Significant findings and key audit matters 17. ISA (UK) 260 requires auditors to communicate significant findings from the audit to those charged with governance, which for Midlothian IJB is the Audit and Risk Committee. 18. The Code of Audit Practice also requires public sector auditors to communicate key audit matters. These are the matters that, in the auditor’s professional judgement, are of most significance to the audit of the financial statements and require most attention when performing the audit. 19. In determining key audit matters, auditors consider: • Areas of higher or significant risk of material misstatement. • Areas where significant judgement is required, including accounting estimates that are subject to a high degree of estimation uncertainty. • Significant events or transactions that occurred during the year. 20. There are no significant findings or key audit matters to report Page 64 of 86
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Audit of the annual accounts | 9 Qualitative aspects of accounting practices 21. ISA (UK) 260 also requires auditors to communicate their view about qualitative aspects of Midlothian IJB’s accounting practices, including accounting policies, accounting estimates, and disclosures in the financial statements. Accounting policies 22. The appropriateness of accounting policies adopted by Midlothian IJB was assessed as part of the audit. These were considered to be appropriate to the circumstances of Midlothian IJB, and there were no significant departures from the accounting policies set out in the Code of Practice on Local Authority Accounting in the United Kingdom (the Code). Accounting estimates 23. Accounting estimates are used in Midlothian IJB’s financial statements. Audit work considered the process management of Midlothian IJB has in place around making accounting estimates, including the assumptions and data used in making the estimates. Audit work concluded: • There were no issues with the selection or application of methods, assumptions, and data used to make the accounting estimates, and these were considered to be reasonable. • There was no evidence of management bias in making the accounting estimates. Disclosures in the financial statements 24. The adequacy of disclosures in the financial statements was assessed as part of the audit. The quality of disclosures was reasonable. Audit adjustments 25. No audit adjustments were required to the financial statements greater than the reporting threshold of £0.20 million. 26. In accordance with normal audit practice, a few presentational and disclosure amendments were discussed and agreed with management. The disclosure changes were satisfactory. Significant risks of material misstatement identified in the Annual Audit Plan 27. Audit work has been performed in response to the significant risks of material misstatement identified in the Annual Audit Plan. The outcome of audit work performed is summarised in Exhibit 2. Page 65 of 86
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Audit of the annual accounts | 10 Exhibit 2 Significant risks of material misstatement to the financial statements Risk of material misstatement Fraud caused by management override of controls Management is in a unique position to perpetrate fraud because of management’s ability to override controls that otherwise appear to be operating effectively. Outcome of audit work • We obtained assurances from the external auditors of NHS Lothian and Midlothian Council. These did not identify any areas of concern. • We did not identify any significant weaknesses in the systems of internal control that impact on Midlothian IJB. • We reviewed adjustments at year end and financial monitoring reports and did not identify any significant issues. • We did not identify any significant unusual transactions outside the normal course of business. Results We are satisfied that there is no material misstatement due to management override of controls. Source: Audit Scotland Prior year recommendations 28. The body has made limited progress in implementing the agreed prior year audit recommendations. For actions not yet implemented, revised responses and timescales have been agreed with the body and are outlined in Appendix 1. Page 66 of 86
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Wider scope and Best Value audit | 11 Wider scope and Best Value audit Audit approach to wider scope Wider scope 29. As reported in the Annual Audit Plan, the wider scope audit areas are: • Financial Management and Sustainability. • Vision, Leadership and Governance. • Use of Resources to Improve Outcomes. 30. Audit work is performed on these three areas and a conclusion on the effectiveness and appropriateness of arrangements Midlothian IJB has in place for each of these is reported in this chapter. Best Value 31. Integration authorities have a statutory duty to have arrangements to secure Best Value. To achieve this, IJBs should have effective processes for scrutinising performance, monitoring progress towards the strategic objectives and holding partners to account. Best Value in public services: guidance for Accountable Officers is issued by Scottish Ministers and sets out their duty to ensure that arrangements are in place to secure Best Value in public services. 32. The duty on auditors to consider the arrangements in place to secure Best Value applies to the body as it falls within section 106 of the Local Government (Scotland) Act 1973. 33. Consideration of the arrangements the body has in place to secure Best Value has been carried out alongside the wider scope audit. Page 67 of 86
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Wider scope and Best Value audit | 12 Financial Management and Sustainability Conclusion Midlothian IJB reported a surplus of £0.15 million in its service provision for 2024/25. However, additional funding of £7.83 million was provided in year to meet operational overspends. The scale of the financial challenges Midlothian IJB is facing remains significant, with future funding gaps posing serious risks to the sustainability of health and social care services. Midlothian IJB reported a surplus of £0.149 million in its service provision for 2024/25. However, additional funding of £7.832 million was provided in year to meet operational overspends 34. Midlothian IJB approved its 2024/25 budget in March 2024. The original budget was set at £196.82 million. The budget included proposed savings of £10.04 million. 35. Financial Recovery Plans agreed at the start of the 2024/25 as part of the Transformation Programme, helped delivered in year savings of £7.04 million, of which £0.30 million was non-recurring. 36. In year, Midlothian IJB incurred operational overspends in both Health and Social Care services of £2.95 million and £4.88 million respectively. Due to Midlothian IJB not holding any general reserves and line with the Integration Scheme, both Partners, NHS Lothian and Midlothian Council, provided additional year end funding allocations to fully cover these overspends. 37. In addition, £0.79 million of earmarked reserves were utilised, with £0.94 million being contributed to reserves due to the receipt of unscheduled care funding. This resulted in Midlothian IJB achieving a surplus on the provision of services of £0.149 million for 2024/25. Midlothian IJB’s reserves are critically low, with no uncommitted funds, limiting its ability to manage future financial pressures. 38. One of the key measures of the financial health of a body is the level of reserves held. Midlothian IJB has a general fund reserve which contains earmarked balances for future commitments. Midlothian IJB has no uncommitted balances within its general fund reserve. 39. Exhibit 3 shows the level of reserves held by Midlothian IJB over the past five years. 40. In 2023/24, Midlothian IJB fully utilised its general reserve, with earmarked reserves of £0.80 million held at 31st March 2024. Page 68 of 86
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Wider scope and Best Value audit | 13 41. A review of the reserves policy has taken place in 2025/26. The review concluded that while the existing policy that a general reserve of 2% of net expenditure should be maintained remains robust in terms of governance and reserve purpose, the 2% target should be seen as an optimum level to be built over time. Recognising the current financial challenges, a stepped approach to rebuilding reserves over the next 3–5 years is proposed. 42. This approach will be embedded within the revised Medium Term Financial Strategy ensuring alignment between strategic planning and financial resilience. 43. As set out in paragraphs 44-50, the scale of financial pressures faced by the IJB is significant, and consequently, building reserves up to the target level will be difficult to achieve. 44. Midlothian IJB now has minimal level of reserves which are ringfenced and assigned to specific committed projects for 2025/26. The low level of reserves seriously limits Midlothian IJB’s ability to manage and mitigate future financial pressures. Exhibit 3 Midlothian IJB earmarked and uncommitted reserve movements over 5-year period Source: Midlothian Integrated Joint Board financial statements NB: the earmarked reserves were particularly high in 2021/22 due to significant amounts of covid related funding being distributed for use by Scottish public bodies. Unused funding was returned to the Scottish Government in subsequent years. 0.00 5.00 10.00 15.00 20.00 25.00 2020/21 2021/22 2022/23 2023/24 2024/25 Reserves £m Earmarked General Total Page 69 of 86
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Wider scope and Best Value audit | 14 The scale of the financial challenges Midlothian IJB is facing remains significant, with future funding gaps posing serious risks to the sustainability of health and social care services 45. Like all public services, Midlothian IJB is continuing to face budgetary challenges amid rising demand, increasing costs, and workforce shortages. Given these pressures, ensuring long-term financial stability requires identifying and delivering substantial savings. 46. The budget for 2025/26 was agreed at the Board meeting in March 2025. Midlothian IJB agreed a balanced budget position for 2025/26 which includes a total savings target of £5.80 million. There is a possibility that the required savings will not be achieved for 2025/26. If this occurs Midlothian IJB would need one-off support from partner bodies or to draw on its limited reserves. 47. The ongoing dependence on savings and financial contributions from partners evidences the significant financial risk Midlothian IJB is facing. 48. The latest Medium Term Financial Strategy, reported to the board in April 2024, forecasted a £52.71 million cumulative budget gap from 2024/25 to 2028/29. 49. Midlothian IJB is undertaking a significant Transformation Programme of work to deliver transformation, redesign, and change to ensure a sustainable future for integrated health and social care. Alongside this is a Financial Recovery Programme in 2025/26 designed to provide a foundation of financial stability for Midlothian IJB. We will consider the development and implementation of the Transformation Programme as part of our audit work in 2025/26. 50. The Midlothian IJB Medium Term Financial Strategy for 2025-2030 is also under development and will outline how the resources made available by NHS Lothian and Midlothian Council will be allocated by Midlothian IJB to deliver the ambitions of the Midlothian IJB Strategic Plan 2025-2035. Financial management and reporting arrangements are effective and allow members and officers to scrutinise the budget effectively 51. Senior management and Midlothian IJB members regularly receive and monitor financial information. Finance updates were submitted to Midlothian IJB Board throughout the year. These clearly stated the outturn to date, latest budget information and the projected year-end outturn position. These reports also made clear the impact of ongoing financial pressures. 52. Through attending committee meetings, we observed that senior management and members receive regular and accurate financial information on Midlothian IJB’s financial position and have concluded that Page 70 of 86
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Wider scope and Best Value audit | 15 Midlothian IJB has appropriate financial management and reporting arrangements in 2024/25. Midlothian IJB has appropriate financial control arrangements in place 53. Midlothian IJB does not have any assets, nor does it directly incur expenditure or employ staff, other than the Chief Officer and Interim Chief Finance Officer. All funding and expenditure are incurred by partner bodies and processed in their accounting systems. Midlothian IJB does not have its own financial systems and instead relies on the financial systems of its partner bodies, NHS Lothian and Midlothian Council. 54. As part of our audit approach, we obtained assurances from the external auditors of NHS Lothian and Midlothian Council. The assurances confirmed that there were no significant weaknesses in the systems of internal control for either body which would impact Midlothian IJB. Standards of conduct and arrangements for the prevention and detection of fraud and error were appropriate 55. In the public sector there are specific fraud risks, including those relating to tax receipts, welfare benefits, grants and other claims made by individuals and organisations. Public sector bodies are responsible for implementing effective systems of internal control, including internal audit, which safeguard public assets and prevent and detect fraud, error and irregularities, bribery and corruption. 56. Midlothian IJB does not maintain its own policies relating to the prevention and detection of fraud and error but instead depends on those in place at its partner bodies. Midlothian IJB has a Code of Conduct for members and the Members’ Registers of Interest are publicly available on the IJB’s website. 57. As part of our audit approach, we obtained assurances from the external auditors of NHS Lothian and Midlothian Council. The assurances confirmed that there were no significant weaknesses in the arrangements for the prevention and detection of fraud at either body. Vision, Leadership and Governance Conclusion The audit work performed on the arrangements the body has in place for Vision, Leadership and Governance found that these were appropriate. Governance arrangements remain appropriate and support effective scrutiny, challenge and informed decision making. Page 71 of 86
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Wider scope and Best Value audit | 16 Midlothian IJB Strategic Plan 2025-2035 is due for publication in October 2025 58. Midlothian IJB Strategic Plan covering the period 2025-2035, is in its final stages of development and is due for publication in October 2025. The purpose of this plan is to describe how Midlothian IJB will work with it’s partners Midlothian Council and NHS Lothian, people, communities, the Third and Independent Sector, and the services who provide care and support and agree how they can best contribute to people in Midlothian living well in their community. 59. The plan sets out the three strategic aims. Each of the strategic aims support at least one of the 9 National Health and Wellbeing outcomes. Midlothian IJB’s 25/26 Directions are set out in this way too. Governance arrangements remain appropriate and support effective scrutiny, challenge and decision making 60. The Board met seven times during 2024/25 and the Audit and Risk Committee met four times in the same period. The meetings were held both in person and virtually. Our observations at committee meetings have found that these are conducted in a professional manner and there is a reasonable level of scrutiny and challenge by members. 61. We consider that governance arrangements remain appropriate and support effective scrutiny, challenge and decision making. Change in Chief Finance Officer 62. In accordance with the Public Bodies (Joint Working) (Scotland) Act 2014, each Integration Joint Board is required to appoint a Section 95 Officer. Following the resignation of the Chief Finance Officer (CFO) at the end of September 2023, an interim CFO was appointed from 1 October 2023 and served until 5 December 2024. A new interim CFO was subsequently appointed from 19 December 2024. 63. A permanent CFO is crucial for providing long term strategic vision and leadership. This is particularly important when considering the financial challenges faced by the IJB. The appointment of a permanent CFO should therefore be a priority for Midlothian IJB. Use of Resources to Improve Outcomes Conclusion Midlothian IJB has appropriate arrangements for managing and reporting performance. Arrangements to secure Best Value are developing with a framework expected in 2025/26. Page 72 of 86
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Wider scope and Best Value audit | 17 Performance management arrangements are in place with indicators and targets kept under review 64. The Public Bodies (Joint Working) (Scotland) Act 2014 requires the IJB to produce an annual performance report covering areas such as assessing performance in relation to national health and wellbeing outcomes, financial performance and best value, reporting on localities, and the inspection of services. 65. Midlothian IJB’s 2024/25 Annual Performance Report was presented and approved by the Board in August 2025. While this is an improvement compared to prior year it is a requirement that the Annual Performance Report is published by 31 July each year and Midlothian IJB should work towards achieving this target. 66. The Annual Performance Report for 2024/25 provides year on year trend analysis data for national core performance indicators. The report noted progress for 19 of the 20 national indicators. 67. Of the 19 indicators: • Seven green – performance has improved compared to last year • Five amber - there hasn’t been a significant change in performance compared to last year • Six red - performance has worsened compared to last year • One indicator has not been published in time for the Midlothian IJB Annual Performance Report 68. Midlothian IJB Performance Framework 2025-2028 to support the delivery of the Midlothian IJB draft Strategic Plan is also being developed. We will consider this as part of our review of performance management arrangements in 2025/26. Conclusions on Best Value 69. The Local Government (Scotland) Act 2003 places a duty on Local Government bodies to secure Best Value. As a Section 106 body under the 2003 Act, Integration Joint Boards have the same statutory duty to secure best value. To achieve this, IJBs should have effective processes for scrutinising performance, monitoring progress towards their strategic objectives, and holding partners to account. 70. At the Audit and Risk Committee in September 2024, the committee gave the go ahead to create a Best Value Framework. A draft Best Value Framework has been developed collaboratively by the Chief Financial Officer and Integration Manager. The framework will be presented to Midlothian IJB Audit and Risk Committee later in 2025/26. Page 73 of 86
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Appendix 1 | 18 Appendix 1 Action plan 2024/25 Follow-up of prior year recommendations Issue/risk Recommendation and agreed action Progress b/f 1. Constituent body working papers The unaudited accounts and supporting working papers, including assurance letters from the constituent bodies, were provided within the agreed timescale. However, similar to 2022/23, further working papers and revisions to the Midlothian Council assurance letter were required to enable agreement of social care figures between the unaudited accounts and the ledger. This led to a delay in the audit process and increasing pressure for the audit team and finance staff to complete the audit by the agreed deadline of 19 September. Working papers and assurance letters should be reviewed by management, prior to submission to audit. It is the IJB’s responsibility working with partner bodies, to ensure assurance letters agree to the unaudited accounts and provide sufficient detail to enable external audit to agree the figures to the ledger Original agreed action This reconciliation will now be part of the review of the IJB's accounts prior to the preparation of the Annual Accounts. Original officer / timeline: Chief Finance Officer 31 March 2025 Completed The 2024/25 assurance letters and working papers provided to audit were easily agreed to the unaudited accounts. No issues were identified with the quality of working papers during the 2024/25 audit. Page 74 of 86
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Appendix 1 | 19 b/f 2. Management Commentary The unaudited annual accounts were received in line with the agreed audit timetable on 21 June 2024. However, there is scope to improve the narrative in the annual report and accounts. The management commentary did not fully tell the story of the IJB, give good performance detail or transparently set out financial information (e.g. detail on use of earmarked reserves and gross expenditure which was included in the prior year accounts was excluded this year). The management commentary should be reviewed to ensure it provides a clear summary of performance during the year and transparently sets out financial information Original agreed action The accounts have been updated for the financial position and the management commentary has been expanded. Original officer / timeline: Chief Finance Officer 31 March 2025 In progress While the Management Commentary effectively outlines financial information and provides a performance overview, there is an opportunity to enhance its value by including more detailed analysis. Revised action: Work will be undertaken to review the management commentary and identify opportunities for development, ensuring alignment with other key documents such as the Strategic Plan and the Medium-Term Financial Strategy. Responsible officer: Chief Officer Revised date: March 2026 Page 75 of 86
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Appendix 1 | 20 b/f 3. Financial Management – Reserves Policy The current level of reserves falls below the Midlothian IJB Reserve Policy, approved by members in 2017, which indicates that a general reserve of 2% of net expenditure should be held to cushion financial risk. Financial management will be more challenging without an adequate reserves cushion to support increases in expenditure and reduced funding levels. Midlothian IJB should review its reserves policy to ensure it is up to date and takes in to account the fiscal challenges which the public sector is currently facing. Original agreed action At this time there is no opportunity to generate further general reserves. The IJB recognises this. A report will be made to the IJB clarifying the current position on reserves. Original officer / timeline: Chief Officer December 2023 In progress A review lead by the Chief Finance Officer has taken place in 2025/26 which concluded that the 2% target should be seen as an optimum level to be built over time. The revision to the Reserves Policy is subject to approval by the board. Revised action: The Reserve Policy was presented to the MLIJB Audit & Risk Committee in June 2025 and will be reconsidered by the Committee in September 2025 for final approval, before being submitted to the Board for decision. Responsible officer: Chief Finance Officer Revised date: December 2025 Page 76 of 86
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Appendix 1 | 21 b/f 4. Delay in publication of the Annual Performance Report The Board of Midlothian IJB has continued to monitor key performance throughout the year. The 2023/24 Annual Performance Report is being progressed through the Strategic Planning Group and is expected to be submitted to the board for approval in October 2024 following detailed scrutiny by the Performance Assurance and Governance Group and the Senior Management Team. This will be later than the required deadline of 31 July. The IJB should make every effort to publish by deadlines going forward. Original agreed action In principle we accept this recommendation on the basis that the legislation is clear about this timescale. However, in practice such a timescale is simply not deliverable. The data to complete the APR is often not available until late July. The APR report then has to be prepared, submitted to the SPG for comment and approval and then submitted to the IJB for comment and approval. This will not be completed until the meeting of the IJB in October 2024. This is not simply a Midlothian issue - we understand that other IJBs share the same challenges with this timeline. We have, and we will continue to discuss these challenges with the Scottish Government. Original officer / timeline: Chief Officer 31st December 2024 In progress The 2024/25 Annual Performance Report was approved by the Board in August 2025. While this represents an improvement on the previous year’s timeline, Midlothian should continue to aim for compliance with the statutory deadline of 31 July. Revised action: As in previous years, Midlothian aims to meet the statutory deadline of 31 July; however, this is typically not achievable due to delays in the release of national information required to complete the annual performance report. Midlothian has engaged with the Scottish Government to outline the challenging nature of this position. Responsible officer: Chief Officer Revised date: December 2025 Page 77 of 86
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Appendix 1 | 22 b/f 5. Governance - Transparency The nationally validated PHS Members’ Register of Interests is not accessible to local citizens as it is not published on the Midlothian IJB website. There is a lack of transparency in governance arrangements. The Members Register of interests should be available from the Midlothian IJB website. Original agreed action The register of interests has been published for all elected members and work is progressing to complete the disclosures for all members of the IJB. Original officer / timeline: Chief Officer 31st December 2024 In progress Registers of Interests for the Chief Officer, Chief Finance Officer and Partnership Representative members’ are not available on Midlothian IJB’s website. Revised action: The outstanding submissions for the register will be considered by the MLIJB Audit & Risk Committee in September 2025, with the exercise expected to conclude shortly thereafter. Responsible officer: Chief Officer Revised date: December 2025 b/f 6. Changes in Chief Finance Officer The IJB is required to appoint a s95 officer and this role was carried out by the Chief Finance Officer in 2022/23. However, the Chief Finance Officer is due to resign from the IJB and a replacement has not yet been identified for the post. It is crucial that a replacement s95 Officer is appointed to ensure continued financial management arrangements and compliance with the Public Bodies (Joint Working) (Integration Joint Boards) (Scotland) Order 2014 Original agreed action Agree, interim and future Chief Finance Officer post arrangements for the IJB will be presented to the next IJB Board meeting. Original officer / timeline: Chief Officer December 2023 In progress An interim Chief Finance Officer is currently in post until December 2025. Work is underway to establish a permanent Chief Finance Officer role within Midlothian IJB, with the appointment expected in early 2026. Revised action: Future arrangements for the Chief Finance Officer post for the IJB will be discussed with partners, and options to recruit a permanent appointment will be explored and progressed. Responsible officer: Chief Officer Revised date: March 2026 Page 78 of 86
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Appendix 2 | 23 Appendix 2 Supporting national and performance audit reports Report name Date published Local government budgets 2024/25 15 May 2024 Scotland’s colleges 2024 19 September 2024 Integration Joint Boards: Finance and performance 2024 25 July 2024 The National Fraud Initiative in Scotland 2024 15 August 2024 Transformation in councils 1 October 2024 Alcohol and drug services 31 October 2024 Fiscal sustainability and reform in Scotland 21 November 2024 Public service reform in Scotland: how do we turn rhetoric into reality? 26 November 2024 NHS in Scotland 2024: Finance and performance 3 December 2024 Auditing climate change 7 January 2025 Local government in Scotland: Financial bulletin 2023/24 28 January 2025 Transparency, transformation and the sustainability of council services 28 January 2025 Sustainable transport 30 January 2025 A review of Housing Benefit overpayments 2018/19 to 2021/22: A thematic study 20 February 2025 Additional support for learning 27 February 2025 Integration Joint Boards: Finance bulletin 2023/24 6 March 2025 Integration Joint Boards finances continue to be precarious 6 March 2025 General practise: Progress since the 2018 General Medical Services contract 27 March 2025 Council Tax rises in Scotland 28 March 2025 Page 79 of 86
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Midlothian Integration Joint Board Draft 2024/25 Annual Audit Report Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 Email: info@audit.scot www.audit.scot AS.5.0 Page 80 of 86
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Midlothian Integration Joint Board Thursday, 18th September 2025, 15:00-16:00 Midlothian IJB Directions 2025/26 and Financial Planning Item Number 5.2 Executive summary This report sets out the position regarding ongoing work to determine the detail of financial recovery planning allocation for Directions 9.3.1 to 9.3.8 and presents 2 proposed revisions to Directions 2025/26. The Midlothian IJB Directions policy states that although Midlothian IJB will issue Directions to Midlothian Council and NHS Lothian Health Board at the point of agreeing the budget for the following financial year, it may not be possible for Midlothian IJB to make all the decisions required in relation to delivery or transformation at this time. This was the case for the financial recovery elements of Directions 9.3.1 to 9.3.8 at the time of issue in March 2025. Although individual financial allocation to the Transformation workstreams was not identified before Midlothian IJB agreed its 2025/26 budget, these activities must be delivered within available resources, consider the impact across the system, and identify where the IJB may wish to consider parallel investment and disinvestment to support positive change at pace. Following the development of a new reporting methodology for Directions, the Strategic Planning and Performance Service has asked new questions of finance at HSCP and IJB levels. This has raised opportunities to better align financial reporting to the objectives of the IJB. Work to align financial processes with the activity of the IJB is underway and will be included as part of the Midlothian IJB Medium-Term Financial Strategy presented to the Board in December 2025. It is also recommended that, following progress in the Quality Planning phase of two Directions (2.4 and 5.3), the Board agree to amending these Directions to incorporate the specific action required to ensure the success of these strategic ambitions. As a result of this report, Members are asked to: Agree that reporting on the financial allocation for Directions 9.3.1 to 9.3.8 will be included in the Midlothian IJB Medium-Term Financial Strategy, Review proposed amendments to Directions 2.4 and 5.3, and Give delegated authority to Morag Barrow in her capacity as Chief Officer to write to both Partners with the update to Directions 2.4 and 5.3 and publish this information on the Midlothian Health and Social Care website. Page 81 of 86
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Midlothian Integration Joint Board Report Midlothian IJB Directions 2025/26 and Financial Planning 1 Purpose 1.1 This report sets out the position regarding ongoing work to determine the detail of financial recovery planning allocation for Directions 9.3.1 to 9.3.8 and presents 2 proposed revisions to Directions 2025/26. 2 Recommendations 2.1 As a result of this report, Members are asked to: Agree that reporting on the financial allocation for Directions 9.3.1 to 9.3.8 will be included in the Midlothian IJB Medium-Term Financial Strategy, Review proposed amendments to Directions 2.4 and 5.3, and Give delegated authority to Morag Barrow in her capacity as Chief Officer to write to both Partners with the update to Directions 2.4 and 5.3 and publish this information on the Midlothian Health and Social Care website. 3 Background and main report 3.1 Integration Authorities, Health Boards and Local Authorities have a legal obligation to both issue and monitor the effectiveness of Directions as described in the Public Bodies (Joint Working) (Scotland) Act 2014. 3.2 Midlothian Directions for 2025/26 were approved on 27th March 2025 and issued to the Chief Executive of Midlothian Council and NHS Lothian on 28th March 2025. Directions for 2025/26 were developed in response to the Midlothian IJB draft Strategic Plan 2025-2035 with input from Board Members and the Strategic Planning Group, the Midlothian HSCP Executive Leadership Team, and from both Partners. 3.3 Directions for 2025/26 focus on the foundational action required to achieve operational transformation and financial balance across the system. This approach allows Midlothian IJB to review activity and progress then take any decisions necessary to facilitate the whole system change required to deliver transformation. 3.4 The Midlothian IJB Directions Policy states that although Midlothian IJB will issue Directions to Midlothian Council and NHS Lothian Health Board at the point of agreeing the budget for the following financial year, it may not be possible for Midlothian IJB to make all the decisions required in relation to delivery or Page 82 of 86
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Midlothian Integration Joint Board transformation at this time. This was the case for the financial recovery elements of Directions 9.3.1 to 9.3.8 at the time of issue in March 2025. 3.5 These Directions are part of the work being taken forward by the Midlothian Health and Social Care Partnership Transformation and Change Programme Board to redesign a new and sustainable future for health and social care. Although individual financial allocation to the Transformation workstreams was not identified before Midlothian IJB agreed its 2025/26 budget, these activities must be delivered within available resources, consider the impact across the system, and identify where the IJB may wish to consider parallel investment and disinvestment to support positive change at pace. 3.6 Following the development of a new reporting methodology for Directions, the Strategic Planning and Performance Service has asked new questions of finance at HSCP and IJB levels. This has raised opportunities to better align financial reporting to the objectives of the IJB. Work to align financial processes with the activity of the IJB is underway and will be included as part of the Medium-Term Financial Strategy presented to the Board in December 2025. 4 Policy Implications 4.1 This paper supports the strategic Direction of the IJB and relates to the Public Bodies (Joint Working) (Scotland) Act 2014. (section 26 and 26) and the requirement for Directions from Integration Authorities to Health Boards and Local Authorities. Statutory Guidance (2020) on Directions from Integration Authorities to Health Boards and Local Authorities on how to improve practice in the issuing and implementation of Directions issued under the Public Bodies (Joint Working) (Scotland) Act 2014 4.2 Recommendations in this report are in line with the Midlothian IJB Directions Policy. 5 Directions 5.1 This report directly impacts primarily on the financial resources available to deliver Directions 9.3.1 to 9.3.8 5.2 It is also recommended that, following progress in the Quality Planning phase of two Directions (2.4 and 5.3), the Board agree to amending these Directions to incorporate the specific action to ensure the success of these strategic ambitions 5.3 Directions 2.4 is currently ‘NHS Lothian and Midlothian Council will support Midlothian HSCP to undertake a review of Social Work and Occupational Therapy teams by December 2025’. To effectively undertake this work, the Strategic Planning and Performance Service have been requested to develop a ‘social work dashboard’ that allows the visualisation of data in ways that are not possible using existing system and also include the addition of financial information. Page 83 of 86
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Midlothian Integration Joint Board 5.4 This work is a significant undertaking for the Strategic Planning and Performance Service and will require support from both Partners to effectively deliver a product that provides meaningful insight to support service decision. 5.5 It is suggested that the following amendment to Direction 2.4 is reviewed and, subject to any amendments, agreed by Midlothian IJB for the Chief Officer for immediate issue to Partners. NHS Lothian and Midlothian Council will support Midlothian HSCP to undertake a review of Social Work and Occupational Therapy teams by December 2025. This will include supporting existing data sharing agreements, reaching agreement on necessary data sharing requirements, and the development of data insight and visualisation tools that combine key social work data with financial information to inform effective service decision making and financial management.’ 5.6 Direction 5.3 is currently ‘NHS Lothian and Midlothian Council will support Midlothian HSCP to develop integrated data at population level to support the prediction, identification, and planning of changing demographic profile and need to support dynamic whole system change across time and report on progress by December 2025’. 5.7 The Strategic Planning and Performance Service have undertaken initial work to establish the required parameters and data requirements. As horizon scanning and stakeholder engagement has progressed, it is clear that the work required to deliver a ‘social work dashboard’ will also form a central component of this work. 5.8 It is suggested that the following amendment to Direction 5.3 is reviewed and, subject to any amendments, agreed by Midlothian IJB for the Chief Officer for immediate issue to Partners. ‘NHS Lothian and Midlothian Council will support Midlothian HSCP to develop integrated data at population level to support the prediction, identification, and planning of changing demographic profile and need to support dynamic whole system change across time and report on progress by December 2025. This will include supporting existing data sharing agreements, reaching agreement on necessary data sharing requirements, and the development of data insight and visualisation tools that combine key health and social care data to inform effective planning, decision making, and financial management.’ 6 Equalities Implications 6.1 An Equality and Children’s Rights Impact Assessment (ECRIA) screening tool has been completed and submitted with this report. There is no requirement to undertake an ECRIA as a result of this report. 6.2 However, the Senior Responsible Officers (SROs) of Midlothian HSCP who are leading a Transformation workstream within the Midlothian HSCP Transformation and Change Programme Board will need to undertake an ECRIA as part of the Quality Planning phase of this work. Page 84 of 86
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Midlothian Integration Joint Board 7 Resource Implications 7.1 This report does not directly impact on the viability of the Midlothian IJB budget for 2025/26. All proposed figures are allocated within the resources made available to the Board by NHS Lothian and Midlothian Council. 7.2 Financial strategy has similar parameters and principles to strategic planning and the science of Systems Thinking. A key premise of Systems Thinking is that for a whole system to be operating at its most efficient, it is likely that each constituent part may not be, and will neither have equal resource, capacity, demand nor levels of operational efficiency. It is, of course, not the individual actions of any single component part that drive System change but the contribution of, and relationship between, all component parts and the dependencies created between them. 7.3 Wider progress, successes, and challenges will be reported through Directions Part Year Reporting in October 2025 and Full Year Reporting in February 2026. However, it is important that financial reporting mechanisms consider progress through The monitoring of the financial position for each component of the Midlothian HSCP Transformation and Change Programme. Oversight of areas where investment is required and the mechanisms deployed to ensure this can be enabled by strategic disinvestment Identification of any unintended financial consequences on one part of the System resulting from changing operational parameters in another. 8 Risk 8.1 Integration Authorities, Health Boards, and Local Authorities have a legal obligation to issue and monitor the effectiveness of Directions as described in the Public Bodies (Joint Working) (Scotland) Act 2014. Not complying will pose legislative risks and it will be more difficult for Midlothian IJB to undertake its duties related to accountability and good governance. There is a risk that without clear parameters for financial delivery, the workstreams within the Midlothian HSCP Transformation and Change Programme may preset financial risks or may not identify transformation plans that release the necessary financial resources to drive Directions 9.3.1 to 9.3.8 and future transformation activity. 8.2 Board members should routinely consider when Directions need to be revised, or new Directions are required to be issued to Partners. 9 Involving people 9.1 Directions are the priority actions that Midlothian IJB have agreed support the most effective progression of the ambitions of the Midlothian IJB draft Strategic Plan 2025- Page 85 of 86
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Midlothian Integration Joint Board 2035. This strategy has undergone extensive consultation and included the voices of over 1000 people in its development over 2 years. 9.2 The Midlothian IJB Consultation and Engagement Statement 2025-2028 that accompanies the Midlothian IJB draft Strategic Plan 2025-2035 describes the consultation that has been undertaken as part of this work. 10 Background Papers 10.1 n/a Author’s Name Gill Main Designation Integration Manager Contact Information gill.main3@nhs.scot Date 08/09/2025 Appendices: none Page 86 of 86