Agenda Document Pack - Midlothian Integration Joint Board - Audit and Risk Committee - 10_09_2026
Midlothian Council · 10 September 2026
Back to Midlothian Integration Joint Board - Audit and Risk Committee — 10 September 2026 and its agenda
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Notice of Meeting and Agenda Midlothian Integration Joint Board - Audit and Risk Committee Venue: Virtual Meeting held via Teams Date: Thursday, 10 September 2026 Time: 14:00 Contact: Clerk Name: Democratic Services Clerk Telephone: Clerk Email: democratic.services@midlothian.gov.uk Further Information: This is a meeting which is open to members of the public. Page 1 of 160 Chair: Councillor Connor McManus, Midlothian IJB Member Vice Chair: Vacant
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1 Welcome, Introductions and Apologies 2 Order of Business 5 Including notice of new business submitted as urgent for consideration at the end of the meeting. 3 Minute of Previous Meeting 3.1 5 - 20 3.2 21 - 22 4 Audit and Risk Committee minutes 04th June 2026, Chair Action Log – Chief Finance Officer Updates 4.1 Chairs Update (Verbal) – Councillor Connor McManus, Chair Public Reports 5.1 23 - 36 5.2 37 - 100 5.3 101 - 140 5.4 Risk Register Update 2026/27 Presented by Eleonora Ho, Chief Finance Officer Draft Audited Annual Accounts Presented by Eleonora Ho, Chief Finance Officer External Audit Opinion Presented by Claire Gardiner, Audit Scotland Performance Management Audit Terms of Reference Presented by Claire from BDO 141 - 146 Page 2 of 160 Resource Panel Deep Dive Presented by Eleonora Ho, Chief Finance Officer 147 - 160 5.5
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6 Any other business 7 Any other urgent matters to be raised with the Chair in advance of this meeting. The next meeting will be held on Thursday 26th November 2026, 14:00 - 16:00. Page 3 of 160 Date of Next Meeting
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MIJB - Audit and Risk Committee MIJB – Audit and Risk Committee Thursday 10th September 2026 Item No 3.1 Meeting Date Time Venue Audit and Risk Committee Thursday, 4 June 2026 2.00pm Virtual Meeting via MS Teams Present (IJB voting members): Councillor McManus (Chair, Midlothian Council) Heather Campbell Dr Amjad Khan (Vice Chair) Antony Clark (Independent Member) Councillor Derek Milligan (Midlothian Council) Councillor Kelly Parry (Midlothian Council) George Gordon Present (IJB non-voting members): Morag Barrow (Chief Officer) Eleanora Ho (Chief Finance Officer) Sandra Bagnall (Executive Business Manager) Present (Officers): Gill Main (Integration Manager) Duncan Stainbank (Chief Internal Auditor) In attendance: Louise Middleton (Democratic Services Officer) Apologies: Claire Gardiner (External Audit, Audit Scotland) Wendy Metcalfe Val De Souza Page 5 of 160
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MIJB - Audit and Risk Committee 1. Welcome and Introductions The Chair welcomed everyone to the meeting of the Midlothian Integration Joint Board (MIJB) – Audit and Risk Committee (A&R). Apologies highlighted to the group. 2. Order of Business The Order of Business is as outlined in the agenda. There were no matters arising to be discussed. Declarations of Interest No declarations of interest were received. 3. Minute of Previous Meetings 3.1 The Minute of the Audit and Risk Committee meeting held on 5 March 2026 was submitted and approved. The Independent Member asked that section 5.4 is corrected as it should read CIPFA Solace and also asked that Democratic Services check the tense throughout the minute to ensure the minute is in past tense and decisions are recorded as decisions rather than prospective actions. 3.2 Action Log - The Action Log was noted by the Committee. 4. Discussion Topic Page 6 of 160
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MIJB - Audit and Risk Committee 4.1 Chairs Update (Verbal) – Councillor Connor McManus The Chair provided a verbal update. They noted there was a motion at the last Council meeting about funding and also that the Chief Officer and Chair are preparing a letter to the Cabinet Secretary to welcome them to post, express some of the issues that we are facing that were outlined in the motion, and also invite them to a meeting with IJB, whether that be through a direct meeting or through COSLA. 4.2 IJB Complaints – Sandra Bagnall, Executive Business Manager (verbal update) Sandra Bagnall introduced themself as the Executive Business Manager currently covering for Roxanne King. The Integration Manager and Executive Business Manager met with the Chief Internal Auditor which led to a meeting with Saty Kaur, Chief Officer, Corporate Services and Nick Clater, Head of Adult & Social Care to discuss the logging of IJB complaints. The current situation at the moment is that we have a system in place which Lisa Cummings is responsible for, and that is in line with what other Lothian IJBs but there's been a recognition that we need something that's a bit more robust. At the meeting East Lothian Council colleagues stated that it would require significant system changes to bring in the IJB complaints and this can't be accommodated without significant financial investment, however, there is a plan to review the system, and the Chief Officer Corporate Solutions has agreed that IJB will be scoped into that work. 5 Public Reports Report Title/Summary, Decision Action Owner Date to be Completed/ Comments 5.1 Risk Register Update 2025/26, presented by Eleanora, Chief Finance Officer The Chief Finance Officer presented the Risk Register update. This report presents the Integration Joint Board’s (IJB) Risk Register for review and updating at end Q1 2026/27. Page 7 of 160
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MIJB - Audit and Risk Committee Report Title/Summary, Decision Action Owner Date to be Completed/ Comments Key Change Since Previous Committee • Risk MLIJB1 increased from Medium to High due to delivery performance against Directions • No risks added or removed The IJB maintains an active Risk Register that is reviewed quarterly by senior management and reported to every meeting of this Committee, supporting robust governance and oversight of key strategic and operational risks. Since the previous Committee meeting, one risk (MLIJB1) has increased in rating from Medium to High due to performance against delivery of Directions. No new risks have been added. Committee Members are asked to: • Review the updated Risk Register • Confirm whether any further risks or amendments are required • Agree the Risk Register at Q1 2026/27 The Independent Representative noted that they were comfortable with increasing that risk to high, but queried if this was just past performance data and the risks and deterioration that's caused that? The Independent Representative also asked about risk 3, about the ability of the IJB to deliver its priorities, noting this was high, and questioned if this may move to very high in the future. The Chief Finance Officer noted that the first risk is mainly a result of directions last year. The Integration Manager added that many of the directions weren't delivered and the reason for the majority of that was significant operational pressures with business as usual, as well as financial recovery and the ambitions of the board. All of those directions that weren't Page 8 of 160
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MIJB - Audit and Risk Committee Report Title/Summary, Decision Action Owner Date to be Completed/ Comments delivered have been incorporated into the directions of 26/27, and these should be reviewed after mid-year. The Independent Representative asked about the IJB 6 risk, the sustainability of external providers and when we are likely to know how good the current controls are. The Chief Finance Officer did not know the answer to this but would look into this and come back with an update. The Chief Officer noted that they had been considering how we are commissioning and what we need to do to refresh that model. There was a Strategic Planning Group session held a couple of weeks ago to consider review and change the strategic planning group focus to include commissioning as well. The Chief Officer added that they intend to speak with Council colleagues about recruiting a Contract Manager within HSCP. The Chair highlighted that, since the formation of the new government, there has been an introduction of public sector reform as a Cabinet Secretary, and it may be worthwhile keeping an eye on what this means going forward. 5.2 Annual Governance Statement Presented by Duncan Stainbank, Chief Internal Auditor The purpose of this report is to present the draft Annual Governance Statement 2025/26 for the Midlothian Health and Social Care Integration Joint Board (MIJB) which explains the MIJB’s governance arrangements and system of internal control and reports on their effectiveness for the year ended 31 March 2026. The MIJB Audit and Risk Committee is therefore asked to: • Consider the Midlothian Health and Social Care Integration Joint Board Draft Annual Page 9 of 160
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MIJB - Audit and Risk Committee Report Title/Summary, Decision Action Owner Date to be Completed/ Comments Governance Statement 2025/26 (Appendix 1), which explains the MIJB’s governance arrangements and system of internal control and reports on their effectiveness for the year ended 31 March 2026, and provide any commentary thereon and approve for inclusion in the draft Annual Accounts 2025/26. The Chief Internal Auditor noted that there remains the likelihood of an annual overspend of £13.7 million by 2028/29 financial year and this highlights the amount of work that needs to go into ensuring IJB have a sustainable financial position moving forward. The Chief Internal Auditor added that there is a complaints process in place, but there is a desire to get that policy and procedure in place in conjunction with Midlothian Council to make sure that we've got robustness. The Integration Manger noted that, whilst there was nothing inaccurate in the governance statement, there were a couple of nuances to consider. The first in section B, ensuring openness and stakeholder engagement, the board published its participation and engagement statement, which is a separate and significant piece of work following the HIST community engagement quality framework and separate from the consultation and engagement statement that must accompany the strategic plan. That was published in October 2025 and sets out the action the board will take to ensure that it communicates well with people and communities. The Integration Manager also noted that in sections C&D there wasn't any mention of the JSNA which is a good document and a national exemplar. The Integration Manager also noted that in section F, risk and performance, there was no mention of the performance framework which describes how we get from our highest-level strategy right down to the very nub of operational action and it would be good to include this. The Independent Representative noted this was a great report, however asked, as we are Update some sections with wording as suggested by the Integration Manager. Chief Internal Auditor Page 10 of 160
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MIJB - Audit and Risk Committee Report Title/Summary, Decision Action Owner Date to be Completed/ Comments reliant on the systems and controls within the partner agencies, how we get assurances on their systems to help feed into the assurance statement? The Chief Internal Auditor noted there was protocol and sharing between the Chief Internal Auditors Team and the NHS Internal Team throughout the year. 5.3 Draft Unaudited Financial Accounts (2025/26) Presented by Eleonora Ho, Chief Finance Officer This report presents the Midlothian Integration Joint Board (IJB) draft unaudited accounts in line with the statutory duty to publish a set of Annual Accounts every financial year. Integration Authorities are governed by the same statutory regulations that govern local authorities. The process to prepare a set of annual accounts is done in three stages. • A draft set of unaudited annual accounts must be published before the end of June. • These draft accounts will then be audited by the IJB’s appointed auditors. • The final audited annual accounts must be published by the end of September. The management commentary is largely shared with the Annual Performance report which is also currently in draft form. Amendments and additions to this information will be updated as they become available. Additionally, Midlothian IJB must ensure that the published document meet the requirement of Midlothian IJB Scheme of Publication. Members are asked to: Page 11 of 160
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MIJB - Audit and Risk Committee Report Title/Summary, Decision Action Owner Date to be Completed/ Comments • Consider the attached draft annual accounts, noting that some performance detail in the management commentary is incomplete. • Approve this draft and recommend the IJB gives authority to Morag Barrow in her capacity as Chief Officer to publish a set of unaudited annual accounts for 2025/26 on the Midlothian Heath and Social Care Website by 30th June 2025. Dr Amjad Khan highlighted a point under health, in the first paragraph, it notes that the biggest pressure on the health budget comes from the cost of medicines prescribed by GP practices, and Dr Amjad Khan felt this gives a false impression that GPs are responsible for all problems in terms of prescribing and noted that much of the prescribing often is from patients discharged from the hospital on newer drugs by specialists. The Chief Finance Officer will update the wording. The Independent Representative suggested emphasising the significance of risks and impact on services and service users. The Chief Finance Officer will update the wording. The Independent Representative enquired if audit and risk committee should be interrogating and exploring how the two specific risks (learning disability and GP prescribing) are being dealt with or if that was more a matter for the IJB itself? The Chief Officer noted they were happy to pick this up under this Committee, the Chair agreed and suggested this could be something to trial for September and consider who has ownership for each area and get some background for each area on what has caused the uplift. The Chief Officer will speak to colleagues to look at this. Update wording to incorporate suggestions from the Vice Chair. Speak to colleagues with ownership for each area and provide an update for each area on the causes of uplifts Chief Finance Officer Chief Officer September 2026 5.4 Draft Annual Performance Report (2025/26) Presented by Gill Main, Integration Manager Page 12 of 160
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MIJB - Audit and Risk Committee Report Title/Summary, Decision Action Owner Date to be Completed/ Comments This report presents a draft of the Midlothian Integration Joint Board (IJB) draft Annual Performance Report (APR) 2025/26 (appendix 1). In order to ensure Midlothian IJB can meet the statutory duty of Integration Authorities to publish an APR before 31st July annually, the Midlothian IJB Audit and Risk Committee is requested to review this draft report and subject to any amendments, recommended to Midlothian IJB that a draft Annual Performance Report (APR) 2025/26 is published without the Public Health Scotland (PHS) validated National Indicator data. Following the template and process developed over the past 4 years, narrative content and best practice examples have been themed within the 9 National Health and Wellbeing Outcomes and align with the themes of Early Intervention and Prevention, Support and Treatment, and Crisis and Emergency. This is complemented by local narrative derived from a combination of sources including operational quarterly reporting, the Midlothian IJB Annual Survey, and nationally curated local performance data. The validated National Indicator data is provided by Public Health Scotland is expected in mid-July and will therefore be included in the final draft of the APR which will be scrutinised by Midlothian IJB Strategic Planning Group on 23rd July and recommended to the Board for final approval in the Midlothian IJB meeting of 20th August 2026. As a result of this report, Members are asked to: • Review this draft of the Midlothian IJB Annual Performance Report (APR) 2025/26, and • Subject to any amendments, recommend this draft Annual Performance Report (APR) 2025/26 for publication to Midlothian IJB. The Chief Officer reiterated their frustration at being required to publish a report that isn’t completed yet to comply. Page 13 of 160
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MIJB - Audit and Risk Committee Report Title/Summary, Decision Action Owner Date to be Completed/ Comments The Vice Chair made a couple of comments, from the view of patients. The first comment was on the electronic reviews of HRT and the concern that it gives the impression that it's a doctor absent service and that people aren't going to be reviewed at all. The Vice Chair was also concerned about the wording around unplanned hospital admissions and that people may get the impression that the sooner they're in hospital, then there's a planned date of discharge and they are out of hospital even before they're better so suggested a line to say where clinically appropriate. The Integration Manager noted that the agenda pack had been issued today but they will ensure to make changes before publication. Update the wording around HRT and unplanned hospital visits to reflect the Vice Chair’s comments Integration Manager 5.5 Climate Duty Statutory Reporting Presented by Gill Main, Integration Manager This report sets out the statutory reporting requirements of Integration Authorities (IAs) following a revision of the Scottish Government Public Bodies Climate Change Duties: Statutory Guidance. Midlothian IJB has a statutory duty to report on climate duties and action taken in November each year. The revised statutory guidance notes in Annexe K that the IJB’s reporting duty falls under scope 3 (indirect emissions) and in their wider influence within the health and social care sector. Scottish Government describes IJBs as ‘major players’ and note their important role in responding to the climate crisis and biodiversity loss. This is despite not having assets, employees or a supply chain of their own, and on the basis of the significant influence IJBs have in relation to the local health and social care agenda and the scale of their annual budgets. In order to ensure the IJB can meet is statutory reporting duties, it is requested that the Audit and Risk Committee consider and recommend to Midlothian IJB the action described in section 3.3 and proposed Direction in 5.2. Page 14 of 160
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MIJB - Audit and Risk Committee Report Title/Summary, Decision Action Owner Date to be Completed/ Comments As a result of this report, Members are asked to: • Note the revised Public Bodies Climate Change Duties: Statutory Guidance, • Consider the recommended action described in section 3.3 and proposed Direction • in 5.2, and • Recommend this action to Midlothian IJB for their consideration at the June Board. George Gordon highlighted for transparency that they were the climate emergency sustainability, environmental sustainability champion for NHS Lothian. The Independent Representative added that they were concerned about duplication with the other statutory bodies that have to do reporting, whilst conscious of the fact that IJBs are important bodies as well and was unsure about the best way forward and felt this may just be a ‘try it and see’ situation. George Gordon noted they felt this was an excellent piece of work and should be highly recommended to the Board. The Chair agreed and felt the Committee were happy to recommend this to the Board. 5.6 Joint Strategic Needs Assessment Development Presented by Gill Main, Integration Manager This report sets out the work underway to develop the Midlothian IJB Joint Strategic Needs Assessment (JSNA) and highlights the link to key work of the Midlothian IJB Strategic Planning Group (SPG). Scottish Government guidance states that Integration Authorities should oversee the production of Joint Strategic Needs Assessments (JSNAs) to analyse the needs of local Page 15 of 160
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MIJB - Audit and Risk Committee Report Title/Summary, Decision Action Owner Date to be Completed/ Comments populations and to inform and guide the strategic planning of health, wellbeing and social care services within their area. Midlothian JSNA updates are coordinated and completed on a rolling quarterly basis by a multidisciplinary working group. This work has received recognition at a national level as an exemplar, and the model has been adopted by other IJBs. However, there are opportunities to develop this key piece of statutory planning and a jointly produced blueprint for change containing the most comprehensive locally owned account of what local communities actually need through closer work with our 15 natural communities and focused local engagement. The statutory planning guidance for Integration Authorities asks that local objectives are informed by the JSNA to address the health inequalities it identifies. These are not advisory suggestions and are design requirements of a JSNA. Midlothian IJB has an opportunity to improve how its JSNA identifies the biggest levers for improving the health and wellbeing of local people and communities by taking a Place-based approach and moving beyond a mapping of health inequalities at a geographic level. As a result of this report, Members are asked to: • Consider the work underway to develop Midlothian IJB Joint Strategic Needs Assessment (JSNA), • Note the connection to the strategy refresh 2028-2031 as the ‘medium term’ component of the Midlothian IJB Strategic Plan 2025-2035, and • Note the opportunities this new approach would provide for the Midlothian IJB Strategic Planning Group (SPG) to identify strategic priorities, transformation, and Quality Improvement Initiatives. George Gordon noted this was another excellent piece of work and asked if Midlothian have Page 16 of 160
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MIJB - Audit and Risk Committee Report Title/Summary, Decision Action Owner Date to be Completed/ Comments community planning partnerships and health partnerships that are locally based, i.e. localities as this was a great way of a pulling in the data and focusing the data into specific areas. The Integration Manager noted their ambition was to learn from the work of our local authorities on place-based thinking and provision and use the 15 community councils that sit under the Federation of Community Councils as the test bed for those areas. The Independent Representative added that they felt this was an excellent report and an exciting development. 5.7 Midlothian Health and Social Care Integration Joint Board Internal Audit Annual Assurance Report 2025/26 The purpose of this report is to present the Internal Audit Annual Assurance Report 2025/26 for the Midlothian Health and Social Care Integration Joint Board (MIJB) which includes the Chief Internal Auditor’s independent assurance opinion on the adequacy of MIJB's overall control environment for the year ended 31 March 2026. The MIJB Audit and Risk Committee is therefore asked to: • Consider the Midlothian Health and Social Care Integration Joint Board Internal Audit Annual Assurance Report 2025/26 (Appendix 1), which sets out the findings and conclusions arising from all Internal Audit work for the year to 31 March 2026, consider the assurances contained therein, and provide any commentary thereon. George Gordon noted there was an NHS Lothian Finance meeting scheduled and enquired if they would hear about sustainability funding. The Chief Finance Officer reported that the sustainability funding would taper off in the next three years and they had not received an allocation letter of the exact amount of funding yet. Page 17 of 160
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MIJB - Audit and Risk Committee 5. Private Reports No items for discussion. 6. Any Other Business The Integration Manager had two AOB items. The first was the Model Publication Scheme Review which was reviewed in 2023-24 and the final report received from internal audit in April 2024. The Integration Manager has commissioned a service audit of compliance which will be helpful ahead of an internal audit process to review and refresh the scheme of publication which should be due around 2027. The Integration Manager also provided an update on the IJB records management. There is a large document and records, review and retention and disposal exercise going on across the council and NHS Lothian. Democratic Services do a good job of supporting the IJB and its committees and keeping a record, however much of the work sits on NHS shared drives so the Integration Manager has contacted Jennifer Homewood, Records Manager, and will work with them and Democratic Services to make sure there is a MOU in place. . The Chair noted at this point that it was the Integration Manager’s last meeting and thanked them for all their hard work and attention to detail and the new horizons brought to IJB on how to look after people we serve to the best of our ability. 8. Date of Next Meeting The meeting terminated at 15.12pm. The next meeting will be held on Thursday 10th September 2026, 14:00-16:00, Microsoft Teams (online). Report Title/Summary, Decision Action Owner Date to be Completed/ Comments Page 18 of 160
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Midlothian IJB Audit and Risk Committee – Action Log MIJB – Audit and Risk Committee Thursday 10th September 2026 Item No 3.2 Action Lead Description Notes Status Due Date Complaints System Executive Business Manager Review of current complaints process following A&R support in September 2025. Verbal update received at the committee meeting in June. Work is ongoing and it is being scoped in the work at the end of the year when the system is updated. The number of complaints remain low and the current process remains in place until a permanent solution is found. Overdue March 2026 Produce an Expenses Policy for the IJB Integration manager The committee requested the production of a separate expenses policy to be used by IJB members. Request to move to November 2026 meeting. In progress September 2026 Development of Leading Indicators Integration manager Review of the indicators around the performance of the MIJB to ensure they are relevant and reflecting of the work done. On hold due to Vacancy in Integration Manager post. Further update in November. In Progress September 2026 A&R Membership Review All Review current Membership to ensure the committee is quorate In progress September 2026 Page 21 of 160
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Midlothian IJB Audit and Risk Committee Thursday, 10th September 2026, 14:00-16:00 Midlothian IJB Risk Register 2026/27 Executive summary This report presents the Integration Joint Board’s (IJB) Risk Register for review and approval for Q2 2026/27. Key changes since the previous Committee • Owners and handlers for MLIJB1 and MLIJB2 updated due to the current Integration Manager vacancy. • MLIJB4 risk effect updated to include the Public Sector Reform Strategy (2025). • MLIJB9 added following the June IJB meeting to cover Climate Change Statutory Reporting. The IJB maintains an active Risk Register that is reviewed quarterly by senior management and reported to every meeting of this Committee, supporting robust governance and oversight of key strategic and operational risks. There have been no changes to risk ratings since the previous review. The Risk Register continues to be actively managed, with no unmitigated or uncontrolled risks identified at this review point. Committee Members are asked to: • note the updates made to the Risk Register for Q2 2026/27; • review and comment on the proposed changes; • confirm whether any further risks, amendments or escalations are required; and • approve the Risk Register for onward reporting at the IJB in October 2026. Item number: 5.1 Page 23 of 160
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Midlothian Integration Joint Board Report Midlothian IJB Risk Register 2026/27 1 Purpose 1.1 The purpose of this paper is to present the updated Midlothian Integration Joint Board (IJB) Risk Register for review and approval for Q2 2026/27. 2 Recommendations 2.1 As a result of this report, Committee Members are asked to: • note the updates made to the Risk Register for Q2 2026/27; • review and comment on the proposed changes; • approve the Risk Register for onward reporting at the IJB in October 2026. 3 Background and main report 3.1 Midlothian IJB maintains a Strategic Risk Register in line with good governance and assurance practice. The register identifies and assesses key risks that may affect the effective operation of the IJB, including risks that could hinder development of the Strategic Plan or delivery of that plan through directions issued to delivery partners. 3.2 At the Audit and Risk Committee meeting on 4 June 2026, members agreed to propose adding a new risk on Climate Change Statutory Reporting. This was supported by the IJB on 20 June 2026 and is reflected in the Q2 Risk Register. The addition reflects increasing statutory reporting expectations on public bodies in relation to climate change duties and supports appropriate oversight of this emerging compliance requirement. 3.3 At the June IJB meeting, members also requested that risk MLIJB4 be amended to include the Public Sector Reform Strategy. This has been reflected in the latest version of the Risk Register. 3.4 The Integration Manager was the handler for two risks on the register. As the post is currently vacant, these risks have been updated to ensure appropriate owners and handlers are in place. 3.5 There have been no changes to risk ratings since the previous review. 3.6 Overall, the Risk Register continues to be actively managed with no unmitigated or uncontrolled risks identified. 3.7 Key updates to the Risk Register are: • Owners and handlers for MLIJB1 and MLIJB2 updated due to the current Integration Manager vacancy. • MLIJB4 risk effect updated to include the Public Sector Reform Strategy (2025). Page 24 of 160
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Midlothian Integration Joint Board • MLIJB9 added following the June IJB meeting to cover Climate Change Statutory Reporting. 3.8 A complete version of the updated Risk Register, including risk descriptions, mitigating actions, and risk ratings, is provided in Appendix One. 4 Policy Implications 4.1 This report does not have any direct impact on policy. 5 Directions 5.1 The content of this report does not have any direct impact on existing Directions. 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 Regular review of the Risk Register helps reduce the risk that emerging strategic, operational or compliance risks are not identified, escalated or mitigated in a timely way. 9 Involving people 9.1 This report has been prepared following consultation with NHS Lothian and Midlothian Council finance partners, officers of Midlothian IJB and the Midlothian HSCP executive management team. 10 Background Papers 10.1 There are no background papers. AUTHOR’S NAME & DESIGNATION Eleonora Ho – Chief Finance Officer CONTACT INFO Eleonora.Ho@nhs.scot DATE 26/08/2026 Appendices: Appendix 1: Midlothian IJB Risk Register Page 25 of 160
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Midlothian IJB Risk Register Risk Description ID MLIJB1 Title The IJB's Partners are unable to deliver the IJB's Directions. Risk Overview Description Risk Effect: There is a risk that the IJBs partners have insufficient workforce or other resources to execute the requirements and ambitions of the IJB Directions. Risk Consequence: The IJB cannot deliver on its strategic plan or financial plan. Controls In Place The controls in place are as follows: • Directions are monitored and reported on twice a year for performance updates. • Ability to review Directions annually. • Financial allocations are included within directions on an annual basis after IJB budgets have been set. • Strategic Planning and Performance continue to support with additional capacity to redesign and transform key areas of service delivery including enhanced data support. • Additional capacity has been sourced to support the delivery of the HSCP Transformation and Change Programme. All activity has been reviewed and a more realistic set of Transformation workstreams are proposed through approved and issued Midlothian IJB Directions for 2026/27. Adequacy of Controls Satisfactory: All controls are working and can be demonstrated through measurement. Risk Assessment Risk Owner Morag Barrow (Chief Officer) Risk Handler Gill Main (Integration Manager) Consequence (Current) Moderate (3) Likelihood (Current) Likely (4) Rating (Current) 12 Risk Level (Current) High Risk Level (Target) Medium Page 27 of 160
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Midlothian IJB Risk Register Risk Description ID MLIJB2 Title The IJB cannot properly deliver its Category 1 responder status if its partners are unable to provide the necessary assurances. Risk Overview Description Risk Effect: IJBs role as Category 1 responders under the Civil Contingencies Act requires that our partners NHS Lothian and Midlothian Council maintain effective business continuity and resilience plans to ensure an appropriate response in times of emergency. There is a risk that our partners may not be able to provide these assurances. Risk Consequence: Failure to maintain up to date and effective resilience plans could result in services unable to maintain essential service delivery. Controls In Place The controls in place are as follows: • Assurance reporting to IJB routinely by Chief Nurse, Chief Social Worker and Resilience lead and an annual Category 1 Responder update provided through the Chief Officer report to the IJB. • Attendance as Midlothian IJB representative at partner resilience exercise events. • Robust operational processes within Midlothian Health and Social Care to meet requirements. • Lessons learnt from previous incident management have been incorporated within standard service delivery, ongoing work to develop a quality management approach will provide additional partnership wide assurances to IJB. • In line with IJB agreement. IJB is represented by, and authority delegated, to the Chief Officer of the IJB. Adequacy of Controls Satisfactory: All controls are working and can be demonstrated through measurement. Risk Assessment Risk Owner Morag Barrow (Chief Officer) Risk Handler Sandra Bagnall (Executive Business Manager) Consequence (Current) Moderate (3) Likelihood (Current) Rare (1) Rating (Current) 3 Risk Level (Current) Low Risk Level (Target) Low Page 28 of 160
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Midlothian IJB Risk Register Risk Description ID MLIJB3 Title The IJB is not able to properly deliver its Strategic Plan due to insufficient resources. Risk Overview Description Risk Effect: The IJBs partners may not be able to allocate sufficient resource to deliver its Financial Plan and Strategic Plan. Risk Consequence: The IJB may not be able to deliver the Strategic Plan to function within the available resources. The IJB may have to amend the ambitions of Strategic in such a way that the progress towards the strategic aim of the Strategic Plan and 9 National Health and Wellbeing Outcomes is compromised. Controls In Place The controls in place are as follows: • Regular budget setting and financial planning meetings with IJB partners to ensure alignment of resource commitments with strategic priorities. • Development of the Medium-Term Financial Strategy, aligned to the Strategic Plan to promote sustainability and realistic ambition. • Partnership governance structures in place to support joint decision-making and risk-sharing. • Development of transformation programmes and efficiency plans to maximise the impact of available resources. • Use of performance monitoring and impact assessment tools to ensure resource deployment is aligned with the 9 National Health and Wellbeing Outcomes. Adequacy of Controls Weak: The controls in place have not made much difference and the level of risk cannot be reduced. Risk Assessment Risk Owner Morag Barrow (Chief Officer) Risk Handler Eleonora Ho (Chief Finance Officer) Consequence (Current) Major (4) Likelihood (Current) Likely (4) Rating (Current) 16 Risk Level (Current) Very High Risk Level (Target) Medium Page 29 of 160
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Midlothian IJB Risk Register Risk Description ID MLIJB4 Title New and/or amended national legislation may impact on the ability of the IJB to deliver its Strategic Plan. Risk Overview Description Risk Effect: There is a risk of further legislation, policy, or national improvement drivers which impact on the IJBs ability to deliver on the Strategic Plan, examples include the legislation relating to a National Care Service, the Health and Care (Staffing) (Scotland) Act 2019, and structural changes within NHS governance arrangements, including the merger or consolidation of sub national planning groups. The Public Sector Reform Strategy (2025) will also contribute to this risk. Risk Consequence: The IJB and its partners may be distracted from the business of delivering the Strategic Plan. Legislation, policy, and national improvement drivers without fiscal support will result in additional pressure on the IJB. The merger or consolidation of sub-national planning groups, may alter decision making routes, create duplication, or dilute IJB influence within system planning structures Controls In Place The controls in place are as follows: • Respond to Scottish Government information requests on impact of future legislation, policies, and national improvement drivers. • Horizon scanning for policy developments through partners and SMT network groups. • Close working relations with Scottish Government through Chief Finance Officer, Chief Officer and COSLA. • Good working relationships with the Scottish Government Integration Governance and Evidence Unit. Adequacy of Controls Unknown: The current controls are not known, and further work is required to identify the current situation. Risk Assessment Risk Owner Morag Barrow (Chief Officer) Risk Handler Eleonora Ho (Chief Finance Officer) Consequence (Current) Major (4) Likelihood (Current) Rare (1) Rating (Current) 4 Risk Level (Current) Medium Risk Level (Target) Medium Page 30 of 160
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Midlothian IJB Risk Register Risk Description ID MLIJB5 Title Impact of the Partners or the Scottish Government's decisions on the IJB and its Strategic Plan. Risk Overview Description Risk Effect: Partners may have to take decisions on functions delegated to the IJB, driven by operational or financial constraints. Similarly, the Scottish Government may issue directives to NHS Boards or Local Authorities on delegated functions which could impact the IJB. This includes national policy directions which set expectations on Boards in relation to service redesign and financial recovery. There is a significant financial risk that such decisions could alter the level of resource available to the IJB or require changes in service delivery that have material financial implications. This may limit the IJB’s ability to plan effectively, deliver its strategic priorities, or achieve financial sustainability. Risk Consequence: The IJB may not see sufficient or adequate progress towards its strategic aims and decisions made may reduce the IJB’s ability to deliver its strategic plan. Controls In Place The controls in place are as follows: • On-going dialogue with the Partners and through a range of national groups (CFO network, CO network) with the Scottish Government. Early engagement with Scottish Government policy leads to understand and influence national directives impacting delegated functions. • Any such decisions and the impacts thereof should be reported to the IJB along with the impact on its ability to deliver the Strategic Plan. • Clear governance arrangements and agreed scheme of integration between the IJB and its partners to reinforce roles, responsibilities, and escalation processes. • Ongoing communication and joint planning between the IJB, NHS Board, and Local Authority to support alignment of operational decisions with strategic aims. Adequacy of Controls Some weaknesses: Improvement can be demonstrated however not at optimal level. Page 31 of 160
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Midlothian IJB Risk Register Risk Assessment Risk Owner Morag Barrow (Chief Officer) Risk Handler Eleonora Ho (Chief Finance Officer) Consequence (Current) Major (4) Likelihood (Current) Possible (3) Rating (Current) 12 Risk Level (Current) High Risk Level (Target) Medium Page 32 of 160
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Midlothian IJB Risk Register Risk Description ID MLIJB6 Title Sustainability of external providers. Risk Overview Description Risk Effect There is a strategic risk and financial risk to the IJB that providers will be unable to meet their contractual obligations due to financial pressures such as the employer national insurance changes. Risk Consequence The IJB may not be able to progress its strategic aims, may experience reputational damage, or may experience financial challenge through supporting the HSCP to deliver the returned hours of statutory care to the impacted individuals. Controls In Place The controls in place are as follows: • Regular financial monitoring and sustainability reviews of commissioned providers to identify early signs of financial distress. • Engagement with providers through regular forums to understand cost pressures, including employer National Insurance increases. • Collaborative commissioning approaches with partners to reduce duplication and enhance efficiency. • Contingency planning to ensure continuity of care in the event of provider failure. • Ongoing dialogue with COSLA and Scottish Government regarding funding pressures on social care provision. Adequacy of Controls Unknown: The current controls are not known, and further work is required to identify the current situation. Risk Assessment Risk Owner Morag Barrow (Chief Officer) Risk Handler Eleonora Ho (Chief Finance Officer) Consequence (Current) Major (4) Likelihood (Current) Possible (3) Rating (Current) 12 Risk Level (Current) High Risk Level (Target) Medium Page 33 of 160
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Midlothian IJB Risk Register Risk Description ID MLIJB7 Title Financial Reporting and Oversight. Risk Overview Description Risk Effect There is a risk that financial reporting for the IJB has an inbuilt inherent time lag. Risk Consequence The IJB will not be able to make timely or well considered financial decisions due to the time lag of financial information. Controls In Place The controls in place are as follows: • Use of in year financial forecasting based on available trends and prior period data to support more timely decision-making. • Regular dialogue between finance officers, budget holders, and the IJB to share emerging issues or pressures in advance of formal reporting cycles. • Development of financial monitoring dashboards to track key cost drivers and variances in near real time. • Use of scenario planning and sensitivity analysis to anticipate potential financial outcomes. Adequacy of Controls Some weaknesses: Improvement can be demonstrated however not at optimal level. Risk Assessment Risk Owner Morag Barrow (Chief Officer) Risk Handler Eleonora Ho (Chief Finance Officer) Consequence (Current) Moderate (3) Likelihood (Current) Possible (3) Rating (Current) 9 Risk Level (Current) Medium Risk Level (Target) Medium Page 34 of 160
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Midlothian IJB Risk Register Risk Description ID MLIJB9 Title Climate Change Statutory Reporting Risk Overview Description Risk Effect Midlothian IJB is required by law to report annually on its climate duties and actions. Its reporting duty covers scope 3 (indirect emissions) and its broader impact on health and social care. Although IJBs lack assets, staff, or supply chains, the Scottish Government considers them 'major players' due to their influence on local healthcare and sizable budgets. There is uncertainty around the requirements for the IJB in the current year with changes to the guidance. Risk Consequence The IJB will not be able to meet its statutory duty in relation of Climate Change reporting. Controls In Place The controls in place are as follows: • Engagement with the Sustainable Scotland Network to understand guidance requirements. • Regular dialogue with other IJB to ensure consistency. • Continue engagement with Partners around their statutory reporting duties Adequacy of Controls Some weaknesses: Improvement can be demonstrated however not at optimal level. Risk Assessment Risk Owner Morag Barrow (Chief Officer) Risk Handler Eleonora Ho (Chief Finance Officer) Consequence (Current) Minor (2) Likelihood (Current) Possible (3) Rating (Current) 6 Risk Level (Current) Medium Risk Level (Target) Medium Page 35 of 160
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Midlothian IJB Risk Register Risk Matrix Insignificant 1 Minor 2 Moderate 3 Major 4 Severe 5 5 Almost Certain Medium 5 High 10 Very High 15 Extreme 20 Extreme 25 4 Likely Medium 4 Medium 8 High 12 Very High 16 Extreme 20 3 Possible Low 3 Medium 6 Medium 9 High 12 Very High 15 2 Unlikely Very Low 2 Low 4 Medium 6 Medium 8 High 10 1 Rare Very Low 1 Very Low 2 Low 3 Medium 4 Medium 5 Page 36 of 160
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Midlothian IJB Audit and Risk Committee Thursday, 10th September 2026, 14:00-16:00 Midlothian IJB draft Audited Annual Accounts 2025/26 Executive summary This report presents the Midlothian Integration Joint Board’s draft audited annual accounts for 2025/26. The annual accounts are a statutory requirement and set out the IJB’s financial position for the year ended 31 March 2026. The accounts have been subject to independent external audit by Audit Scotland. Audit Scotland has issued an unqualified audit opinion. This means the auditor is satisfied that the accounts are free from material misstatement and give a true and fair view of the IJB’s financial position. The auditor’s report does not identify any issues that prevent approval of the accounts. Any audit findings, recommendations or required management actions are set out in the independent auditor’s report. The Committee is asked to note the independent auditor’s report and recommend the 2025/26 audited annual accounts to the IJB for approval. Formal approval and signing of the accounts is scheduled for the special IJB meeting on 20 September 2026, ahead of the statutory deadline of 30 September 2026. A full version of the draft audited annual accounts is detailed in Appendix 1. Committee Members are asked to: • note the independent auditor’s report and unqualified audit opinion; • consider the draft audited annual accounts; • recommend the 2025/26 audited annual accounts to the IJB for approval. Item number: 5.2 Page 37 of 160
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Midlothian Integration Joint Board Report Midlothian IJB draft Audited Annual Accounts 2025/26 1 Purpose 1.1 This report presents the Midlothian IJB draft audited annual accounts for 2025/26 (Appendix 1) for review and comment ahead of recommendation to Midlothian IJB for approval. 2 Recommendations 2.1 As a result of this report, Members are asked to: • note the independent auditor’s report and unqualified audit opinion; • consider the draft audited annual accounts; • recommend the 2025/26 audited annual accounts to the IJB for approval. 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 2025/26 accounts are unqualified. This means the auditor is satisfied that the accounts were free from material misstatement. 3.4 If the Committee is content with the report and the accounts, it may recommend their approval to the IJB for full sign-off at the meeting scheduled for the 20th of September. 3.5 The full set of draft audited annual accounts is attached as Appendix 1. 4 Policy Implications 4.1 This report does not have any direct impact on policy. Page 38 of 160
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Midlothian Integration Joint Board 5 Directions 5.1 This report does not have any direct impact on existing Directions. 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 11 Governance This report is in relation to a Midlothian IJB strategy, plan, policy, Direction, or financial decision that should be escalated to Midlothian IJB for final approval. √ This report includes information that should be escalated to Midlothian IJB for noting only. X This report is the Audit and Risk Committee’s Business as Usual (BAU) and does not require Midlothian IJB’s review. X Author’s Name Eleonora Ho Designation Chief Finance Officer Contact Information Eleonora.ho@nhs.scot Date 26/08/2026 Page 39 of 160
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Midlothian Integration Joint Board Appendices: Appendix 1: Midlothian IJB draft Audited Annual Accounts 2025/26 Page 40 of 160
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1 Midlothian Integration Joint Board (IJB) DRAFT Audited Annual Accounts 2025/26 The Annual Accounts of Midlothian Integration Joint Board for the period from 1 April 2025 to 31 March 2026, 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 2025/26. Page 41 of 160
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3 Contents Audit Arrangements ................................................................................................. 4 Section 1 – Management Commentary ...................................................................... 5 Section 1.1 – Management Commentary Introduction ............................................. 5 Section 1.2 – Annual Performance Report - Operational Performance ...................... 8 Section 1.3 – Future Plans – Bold and Sustained Transformation ............................ 14 Section 1.4 – IJB Financial Performance in 2025/26 ............................................... 17 Section 2 – Membership and Meetings of the MIJB .................................................... 26 Section 3 – Statement of Responsibilities ................................................................ 27 Section 4 - Remuneration Report ............................................................................ 29 Section 5 – Annual Governance Statement 2025/26 ................................................. 33 Section 6 – Independent Auditor’s Report ................................................................ 46 Section 7 – Financial Statements ............................................................................ 51 Section 7.1 - Comprehensive Income and Expenditure Statement .......................... 51 Section 7.2 - Movement in Reserves Statement ..................................................... 51 Section 7.3 - Balance Sheet ................................................................................. 52 Section 7.4 - Notes to the Financial Statements .................................................... 53 Page 43 of 160
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4 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 2025 to 31 March 2026 is Audit Scotland, 102 West Port, Edinburgh EH3 9DN. Page 44 of 160
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5 Section 1 – Management Commentary Section 1.1 – Management Commentary Introduction The management commentary considers the work and financial performance of Midlothian Integration Joint Board (MIJB) during the financial year 2025/26. It provides an overview of the role, remit, objectives, and the strategy of the Board. The role and responsibilities of the IJB The MIJB is an Integration Authority set up under the Public Bodies (Joint Working) (Scotland) Act 2014. We 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. The fourth Strategic Plan for 2025-2035 was approved and published in November 2025. Page 45 of 160
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6 Our Vision and Objectives The Scottish Government measures our performance on Health and Wellbeing Outcomes. National Health & Wellbeing Outcomes 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. Page 46 of 160
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7 We also measure our performance against the objectives in our Strategic Plan. The Midlothian Integration Joint Board Strategic Plan 2025–2035, published in November 2025, sets out the long-term vision and priorities for integrated Health and Social Care across Midlothian. Developed in partnership with Midlothian Council, NHS Lothian and local communities, the Plan provides the overarching strategic framework for how the IJB will plan services, allocate resources and deliver improved health and wellbeing outcomes. Covering the period from November 2025 and subject to formal review every three years, the Strategic Plan underpins the IJB’s financial planning arrangements, including the annual budget setting process, the Medium-Term Financial Strategy, and the issuing of Directions to partner organisations, which translate strategic priorities into operational and financial commitments. The Strategic Plan is centred on three core strategic aims: • supporting people to stay well and prevent ill health • ensuring access to care and support in the community and at home • promoting people’s rights through person-centred and equitable services These priorities directly inform decisions on the allocation of the IJB’s integrated budget and the prioritisation of investment across services. The Plan explicitly recognises that available resources are not expected to keep pace with increasing demand driven by population growth, demographic change and complexity of need. As a result, the IJB must make difficult financial choices, including service redesign and reprioritisation, to ensure resources are used to achieve best value and deliver sustainable outcomes. In this context, the Strategic Plan outlines a programme of transformation focused on prevention, early intervention and shifting the balance of care towards community- based provision. This approach is intended to improve long-term financial sustainability by reducing reliance on more costly acute services and enabling more effective use of limited resources. The Plan also highlights the constraints of annual funding settlements from partner bodies, which create challenges for longer-term financial planning and require ongoing review of priorities and resources. The Strategic Plan therefore also plays a critical role in linking financial planning, service delivery and performance management, ensuring that the IJB’s resources are aligned with its strategic objectives and national outcomes while maintaining financial balance over the medium to long term. Page 47 of 160
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8 Section 1.2 – Annual Performance Report - Operational Performance During 2025/26, Midlothian Integration Joint Board worked in a challenging environment where demand for health and social care continued to grow faster than the resources available. More people needed support, and many people had more complex needs than in previous years. This placed pressure on community health services, social care, care at home, care homes, learning disability services, prescribing and hospital pathways. The story of performance during the year is therefore not a simple one of success or decline. It is a story of a system under pressure, but also one that continued to adapt. The Partnership focused on protecting essential services, supporting people to remain at home where this was safe, reducing avoidable hospital use, improving pathways through care, and beginning the longer-term transformation needed to make services more sustainable. There were areas of progress. Performance improved in several important indicators, including emergency bed days, care inspection outcomes, adults with intensive care needs supported at home, delayed discharge, and time spent at home or community setting in the last six months of life. These improvements suggest that work to strengthen community-based care, improve flow, and support more people at home is beginning to have an impact. However, the performance picture also shows where the system remains under strain. Some measures of people’s experience of care and support declined or showed limited improvement, particularly for adults supported at home and unpaid carers. This is important because it shows that while operational performance has improved in some areas, people’s experience of accessing and receiving support is not yet where the IJB wants it to be. This mixed picture reflects the reality of delivering health and social care in Midlothian during 2025/26. Progress was made, but it was made in a context of rising demand, workforce constraints, financial pressure and increasing complexity. The IJB recognises that improvement must continue to focus not only on activity and system flow, but also on the quality, consistency and experience of care for people and carers. The Strategic Plan approved during the year provides a clear framework for this work. Its focus on prevention, early intervention, care closer to home and person-centred support shaped the Partnership’s priorities during 2025/26 and will continue to guide improvement and transformation in future years. Page 48 of 160
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9 What we delivered during the year The Partnership delivered progress across a number of priority areas. This work was not limited to individual projects; it reflected a wider shift in how services are planned and delivered, with greater emphasis on prevention, improved pathways and better use of data and partnership resources. Strengthening Community-Based Care and Prevention • Expansion of home-first and anticipatory care approaches, supporting more people to remain safely at home and avoid unnecessary hospital admission. • Continued development of multi-disciplinary community teams, improving coordination of care and enabling more timely, person-centred support. • Increased focus on preventative interventions, including falls prevention, wellbeing support, and early identification of risk, helping to reduce deterioration and crisis presentations. • Enhanced support to care homes, including clinical input, workforce support, and use of digital tools to improve resident care and reduce avoidable escalation. These approaches align with wider system evidence demonstrating the benefits of community-first models in reducing hospital demand and improving outcomes. Service Transformation and Pathway Redesign • Redesign of key care pathways, improving flow through services and reducing duplication between Health and Social Care provision. • Implementation of integrated assessment and triage processes, enabling people to access the right support more quickly. • Development of unscheduled care pathways, supporting more effective management of demand across acute and community settings. • Progression of primary care improvement initiatives, strengthening the resilience and sustainability of community-facing services. Improving Quality and Safety • Targeted quality improvement programmes have strengthened care planning, documentation, and risk assessment, addressing areas of identified variation. • Enhanced governance and oversight arrangements have supported greater consistency in service delivery and clearer accountability. • Learning from reviews, complaints, and audits has been embedded into practice, supporting continuous improvement across services. Page 49 of 160
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10 Digital Innovation and Data • Increased use of digital consultations and virtual support models, improving access and flexibility for service users and staff. • Expansion of data sharing and reporting tools, supporting more informed decision-making and improved performance management. • Use of technology to support care delivery, particularly within care homes and community settings, enabling more proactive and preventative care. Partnership and System Working • Continued strengthening of integration across NHS, local authority, and third sector partners, enabling more joined-up services. • Development of collaborative approaches to service delivery, including joint planning, shared resources, and coordinated responses to system pressures. • Active participation in regional and national programmes, ensuring alignment with wider system priorities and access to shared learning. Hosted Services The Midlothian Partnership continues to play a key role in delivering hosted services on behalf of partner organisations and the wider system. Over the past year, hosted services have: • Delivered specialist services at scale, supporting multiple Partnerships and ensuring equitable access to high-quality provision • Enabled greater consistency in care and practice, through shared standards, expertise, and governance arrangements • Improved efficiency and reduced duplication, by centralising delivery and coordinating resources across system partners • Supported key system priorities, including transformation programmes and regional service delivery Progress has also been made in strengthening: • Governance and accountability, with clearer reporting arrangements and performance oversight • Performance management, ensuring hosted services are aligned to local and national expectations • Integration with local services, improving coordination and patient/service user pathways Page 50 of 160
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11 Challenges and areas for continued improvement The progress made during the year must be understood alongside the scale of the challenges facing the Partnership. Demand for care and support continued to increase, and many people required more intensive or specialist support. This placed pressure on budgets, staff capacity and the ability of services to respond quickly. The IJB also continued to operate within a complex partnership environment, where different systems, processes and governance arrangements can make change more difficult to deliver at pace. • Rising demand and complexity of need - Increasing numbers of individuals requiring support, often with multiple and complex conditions, have placed sustained pressure on services. • Workforce capacity, recruitment, and wellbeing - Ongoing challenges in recruiting and retaining staff, alongside the need to support workforce wellbeing, have impacted service resilience and sustainability. • System flow and delayed transitions of care - Continued pressures across hospital and community settings have affected the timely movement of individuals through the system, impacting capacity and performance. • Variation in service delivery and quality - Ensuring consistent standards across all services remains a key focus, particularly in areas such as documentation, care planning, and risk management. • Integration and organisational complexity - Differences in systems, processes, and governance across partner organisations continue to create barriers to fully seamless service delivery. • Digital maturity and data integration - While progress has been made, further work is required to improve data quality, interoperability, and real-time performance reporting. The Draft Annual Performance Report is published on the Midlothian Council Website by the end of July, with the full report available in August. The following national indicators provide further detail on this mixed performance picture. They show where progress has been made, where performance has remained broadly stable, and where further improvement is required. The indicators should be read alongside the wider operational context described above, as they reflect both the impact of improvement activity and the continuing pressures across the health and social care system. Page 51 of 160
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12 The National Indicators National Indicator Our result Our Progress Adults are able to look after their health very well or quite well. 90.0% Adults supported at home agreed that they are supported to live as independently as possible. 49.1% Adults supported at home agreed they had a say in how their help, care or support was provided. 58.9% Adults supported at home agreed that their health and social care services seemed to be well coordinated. 45.9% Adults receiving care or support rated it as excellent or good. 71.2% Adults had a positive experience of the care provided by their GP practice. 66.0% Adults supported at home agreed services and support had an impact on improving or maintaining their quality of life. 55.0% Carers feel supported to continue in their caring role. 36.4% Adults supported at home agreed they felt safe. 69.6% Page 52 of 160
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13 National Indicator Our result Our Progress Premature Mortality Rate*. (People under 75) 399 per 100,000 Emergency Admission Rate. 10,553 per 100,000 Emergency Bed Day Rate. 95,380 per 100,000 Readmission to hospital within 28 days. 97 Proportion of the last 6 months of life spent at home or a community setting. 89.0% Falls Rate (People over 65 who were admitted to hospital). 23.5 Care services graded Good or better in Care Inspectorate Inspections. 78.5% 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. 642 per 1,000 Page 53 of 160
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14 Please note that Indicators 11 and 18 have not been updated at the time of publication. We have therefore included the data from last year’s Annual Performance report. National Records of Scotland have advised that Indicator 11 will be updated in October 2026. Public Health Scotland have advised that Indicator 18 will be updated by the end of 2026. Taken together, the performance results and operational challenges show that improvement cannot rely on short-term actions alone. While progress has been made, the scale of demand, financial pressure and complexity means that more fundamental change is required. This is why transformation is central to the IJB’s future plans. Section 1.3 – Future Plans – Bold and Sustained Transformation The performance story set out in Section 1.2 shows why transformation is now essential. The IJB has made progress in a number of areas, but current models of care are under increasing pressure and cannot fully respond to future demand without change. Transformation is therefore not a separate programme of work; it is the way the Partnership will improve outcomes, manage demand and support financial sustainability. The refreshed Strategic Plan and Medium-Term Financial Strategy provide the framework for this transformation. The aim is to shift more care and support towards prevention, early intervention and community-based services, while making sure that specialist and hospital services are used for those who need them most. This is central to improving outcomes and supporting financial sustainability. The 2026/27 Directions set out three priority areas for transformation. The first focuses on bed-based provision, ensuring that people can access the right level of care when their needs change and supporting better flow between hospital, community and care settings. The second focuses on commissioning and the third sector, including a review of commissioning spend and the development of a new partner provider model to support more flexible, community-based support. The third focuses on the Midlothian Single Point of Access, designing and implementing a simpler route for people to make National Indicator Our result Our Progress Health and Care resource spent on hospital stays where the person was admitted as an emergency. 23% Page 54 of 160
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15 contact with health and social care services and be directed to the right support more quickly. Examples of transformation under way • Home first and community-based support: strengthening arrangements that help people remain safely at home, avoid unnecessary hospital admission and return home from hospital as soon as possible. • Intermediate care and reablement: developing short-term support that helps people regain confidence, independence and daily living skills following illness, injury or hospital admission. • Single point of access and improved triage: streamlining routes into services so people are directed to the right support more quickly and duplication across teams is reduced. • Care at home and care package governance: improving oversight of care packages to ensure support is proportionate, person-centred and focused on outcomes, while helping manage growing demand and cost pressures. • Learning disability service redesign: reviewing how support is planned and delivered for people with complex needs, with a focus on quality, safety, independence and sustainable use of resources. • Prescribing improvement: working with primary care and pharmacy colleagues to support safe, effective and value-based prescribing, recognising the continued financial pressure from medicines. • Digital and data-enabled care: expanding the use of data, digital tools and performance reporting to support earlier intervention, better decision-making and more proactive management of risk. • Partnership with the third sector and communities: strengthening local support networks, community-based prevention and support for people whose needs can be met outside statutory services. The Transformation Programme Board will continue to oversee this work, ensuring that individual projects are aligned to the Strategic Plan, financial recovery actions and the outcomes the IJB wants to achieve for people in Midlothian. Delivery will require strong financial planning, workforce development, engagement with people who use services and unpaid carers, better data and insight, and continued collaboration with NHS Lothian, Midlothian Council and third sector partners. Page 55 of 160
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16 Transformation will not remove the need for difficult decisions. Some savings depend on changing service models, releasing capacity, managing demand differently and delivering benefits over more than one financial year. This creates both financial and operational risk. The IJB will therefore continue to monitor delivery closely, report progress through its governance arrangements and work with partners to ensure that transformation supports safe, effective and sustainable care. Page 56 of 160
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17 Section 1.4 – IJB Financial Performance in 2025/26 The overall “in-year” financial position for the IJB was break even in 2025/26. The break- even position was achieved only after additional one-off allocations by both partners. The total amount of additional payments required to support financial balance in year was of £4.379m, representing just over 2% of the overall funding received in 2025/26. These overspends were supported by both Partners in line with the Integration Scheme and a breakdown of the funding is provided in the table below. This reflects the continued financial pressure across delegated services and highlights the ongoing challenge of delivering financial balance on a recurring basis within the resources available. Funding Breakdown for the year ending 31 March 2026 Health £000's Social Care £000's MIJB £000's Funding for Delegated Services Income received from Midlothian Council and NHS Lothian in 2025/26 143,570 71,748 215,318 Current-year Additional Payments Required One-off income contribution received to ensure the IJB achieved financial balance 1,552 2,827 4,379 Total Funding Including Additional Support 145,122 74,575 219,697 % Value of additional income required 1.08% 3.94% 2.03% The £0.845m surplus shown in the Comprehensive Income and Expenditure Statement in Section 7 differs from the performance against the approved budget described above because of income and expenditure adjustments against its reserves. This means that, while the IJB ended the year in surplus, the underlying cost of delivering services continued to exceed the recurring funding available. The overall MIJB reserves grew from £0.948m in 2024/25 to £1.793m in 2025/26. The increase in earmarked reserves reflects elements of Scottish Government funding for Unscheduled Care. This is due to the timing of expenditure against planned delivery rather than an underspend in underlying funding. The funding has been set aside to support the continued delivery of agreed Unscheduled Care initiatives, where implementation is ongoing and spans financial years. The use of an earmarked reserve ensures that resources remain aligned to their Page 57 of 160
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18 intended purpose and are available to complete delivery of planned service improvements. The use of reserves remains carefully managed to support agreed priorities while recognising that reserves are not a sustainable solution to underlying financial pressures. The charges (shown as Outturn in the Table below) made by Midlothian Council to the MIJB reflect the net direct costs of delivering social care services in Midlothian. The charges from NHS Lothian are based on the Health budget model agreed by the MIJB. For services that are delivered locally by the Midlothian Health and Social Care Partnership (core services), these charges reflect the actual net costs of providing services in Midlothian. Some services used by Midlothian residents are delivered across Lothian rather than locally. These include hosted services and “set aside” services, which are managed on a pan-Lothian basis. The costs of these services are shared across the four Lothian Integration Joint Boards in line with the agreed budget model. For 2025/26, Midlothian IJB’s share of these costs is 10% for hosted services and, in general, 10% of the Lothian share of set aside services and non-cash limited budgets. Non-Cash limited spend includes costs for community pharmacies, community dental services and community ophthalmic services. How the IJB spent its funds in 2025/26 Revised Budget £000's Actual Outturn £000's Outturn Variance £000's Joint Older People Services 33,793 34,418 625 Joint Mental health Services 7,417 7,550 133 Joint Learning Disability Service 25,259 28,992 3,733 Joint Alcohol and Drugs Service 1,144 1,136 (8) Physical Disability Service 4,669 4,922 253 Primary Care 36,949 37,603 654 Prescribing 21,166 22,295 1,129 Community Hospitals 7,455 7,542 87 Community Nursing 12,667 12,230 (437) Other Core Health Services 10,489 9,891 (598) Other Hosted Services 8,548 8,116 (432) Non-Cash Limited 14,798 14,798 0 Health Set Aside 21,656 22,611 955 Other Social Care 9,308 7,593 (1,715) NHSL/MLC Additional Contributions 4,379 0 (4,379) In-year Delegated Services Outturn 219,697 219,697 0 Reserves adjustments 0 (845) (845) Net Surplus per Comprehensive Income and Expenditure Statement 219,697 218,852 (845) Page 58 of 160
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19 The financial position reflects a combination of demand‑led pressures, market factors, and the timing of recovery actions across both Health and Social Care services. Health: The key financial pressures within Health services are driven by rising demand, increasing complexity, and cost inflation. • As in previous years, the biggest pressure on the Health budget comes from the cost of medicines prescribed. Spending on medicines is higher than the budget because prices are rising and more people need prescriptions. Some medicines are new and cost more when they are first used. At the same time, more prescriptions are being issued because Midlothian’s population is growing, and people are living longer. Many people need extra support to stay well, which increases the need for medication. • In addition to prescribing pressures, increasing clinical complexity and multimorbidity have contributed to higher service demand, placing additional pressure on community and primary care services. • Health Set Aside services continue to be a pressure for the IJB, mainly driven by Emergency, General Medicine and Medicine of the Elderly services provided across the acute sites in NHS Lothian, as well as growing pressures linked to Diabetes technology. Social Care: • In Social Care services, the overspend was primarily driven by rising demand and increasing complexity of care needs. During 2025/26 work commenced to support increased governance around the allocation of spend across care packages. This work will continue in 2026/27 and will be a key action in our Medium-Term Financial Strategy. • 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. Financial recovery actions continue to be in place across both Health and Social Care, with a focus on service redesign, demand management and cost control. While some actions introduced during 2025/26 did not deliver full year financial benefit due to lead-in times, these remain central to the IJB’s ongoing approach to managing financial pressures in partnership with NHS Lothian and Midlothian Council. Page 59 of 160
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20 These pressures are consistent with those facing Integration Joint Boards across Scotland, reflecting rising demand for Health and Social Care services, workforce pressures and wider cost inflation. Funding for the IJB The MIJB is funded by Midlothian Council and NHS Lothian. This funding is used to provide the services the MIJB is responsible for under the Integration Scheme. Each year, before the start of the financial year, both partners confirm the level of funding they will provide. The MIJB reviews these funding offers and decides whether to accept them. This decision is informed by guidance issued by the Scottish Government as part of the national budget process. In March 2025, the MIJB accepted the funding offers for 2025/26 from both NHS Lothian and Midlothian Council. These funding arrangements are an important part of how the IJB works in partnership with NHS Lothian and Midlothian Council to plan and deliver Health and Social Care services locally. NHS Lothian provides funding for: • Health services in Midlothian, including: o Local hospitals o Community health services o GP (doctor) services o Other primary care services, such as dentists, opticians and pharmacies • Health services used by Midlothian residents but delivered across Lothian, including: o Inpatient mental health services at the Royal Edinburgh Hospital o Specialist services like Dietetics, Podiatry and Hospice and Palliative Care • Unplanned hospital care for Midlothian residents, such as emergency and urgent treatment. o This care is provided at the Royal Infirmary of Edinburgh, the Western General Hospital and St John’s Hospital. The budget for this care is held by NHS Lothian on behalf of the IJB and is known as “set aside” funding. Midlothian Council provides funding for: Page 60 of 160
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21 • Support at Home and in the Community o Care at Home services, supporting people to live independently in their own homes o Day services and other community-based support • Housing support services o Residential and Specialist Care o Residential and nursing care, including care home placements o Support for people with learning disabilities o Services for people with physical disabilities and long-term conditions • Health and Wellbeing Support o Community mental health services and support o Support for unpaid carers • Assessment, Care Management and Protection o Assessment and care management, including social work support and care planning o Adult protection and safeguarding services Reserves In 2024/25 the Midlothian IJB held £0.948m of earmarked reserves but did not hold any general reserves. As a result, no reserves were available to manage unforeseen financial pressures in 2025/26. This limits the IJB’s financial resilience and reduces its ability to respond to emerging cost pressures or changes in demand. In response, the IJB has reviewed its Reserves Policy. The updated policy was approved by the Audit and Risk Committee during 2025/26, with final approval by the Board planned for 2026/27. The policy confirms that reserves should be built up through planned underspends against operational budgets and must be clearly linked to formal Directions issued by the Integration Joint Board, in line with the Integration Scheme. Where an underspend is not linked to a Direction, the funding will be returned to the relevant partner organisation. The policy also sets out an appropriate level of general reserves, based on the scale and responsibilities of the IJB, at around 2% of net expenditure. The absence of a general reserve means the IJB remains reliant on partner funding to manage in-year pressures or unexpected costs. This presents both financial and operational risks for the IJB and its partner organisations. Page 61 of 160
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22 Financial and Risk Outlook Medium Term Financial Planning Each year, the IJB updates its financial plan to reflect the most up-to-date information available. The plan combines current financial data with future projections to estimate the likely financial position over the next three to five years. This allows the IJB to understand how changing demand, costs, and funding levels may impact services over time. This approach ensures we are always looking forward and clearly understand the resources we need to provide the right treatment, care, and support in Midlothian. By planning over several years, the IJB can plan accurately, identify trends, and identify financial risks early. This will ensure we make informed decisions about where to invest, redesign, or disinvest by aligning our financial planning with wider strategic priorities, such as prevention, early intervention, and sustainable models of care. Budget Setting for 2026/27 At the March 2026 meeting, the MIJB approved the budget offers received from both NHS Lothian and Midlothian Council and was able to set a balanced financial plan for 2026/27. This plan was underpinned by the delivery of £6.8 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. Midlothian IJB 2026/27 Financial Plan Position Agreed Budget £k Expected Expenditure £k Financial Gap £k Social Care 75,122 79,026 3,904 Health 113,660 116,554 2,894 Total 188,782 195,580 6,798 Page 62 of 160
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23 The Medium-Term Financial Strategy The MIJB operates in a financial environment that requires planning beyond a single financial year. In response to this, the MIJB maintains a Medium-Term Financial Strategy (MTFS), which provides a forward-looking assessment of the key financial pressures and risks facing the organisation over the next three financial years. The MTFS reflects the anticipated impact of continued demand growth, demographic change, workforce pressures, inflation, and the cost of existing and new treatments across both Health and Social Care services. It also recognises the ongoing reliance on non-recurring measures and partner support to achieve financial balance, which presents a significant sustainability challenge. The MTFS will be updated regularly to reflect the most up-to-date assumptions, funding information, and policy direction from both the Scottish Government and partner organisations. It is a key tool used by the IJB to understand the scale of its financial challenge, inform decision-making, and support the prioritisation of financial recovery and service redesign actions. While the MTFS identifies significant projected funding gaps in future years, it does not represent a fixed plan. Instead, it provides a framework for ongoing engagement with partners and stakeholders on the actions required to deliver financially sustainable Health and Social Care services for the population of Midlothian. The table below summarises the projected funding gap identified through the current MTFS for the period 2026/27 to 2028/29. These projections are indicative and subject to change as funding assumptions, service demand, policy decisions and financial recovery plans are further developed. Spend Type Financial Year: 2026/27 - £’000 Financial Year: 2027/28 - £’000 Financial Year: 2028/29 - £’000 Social Care (3,904) (5,704) (7,504) Health (2,894) (3,343) (6,176) Total (6,798) (9,047) (13,680) Addressing these projected financial pressures will require sustained collaboration with NHS Lothian and Midlothian Council, difficult decisions regarding service delivery, and continued focus on prevention, demand management and transformation. The MIJB will continue to use the MTFS as a core component of its financial governance and oversight arrangements. Page 63 of 160
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24 Key Financial Risks The main financial pressures facing the IJB remain consistent with those outlined in the 2024/25 Annual Accounts. These pressures are significant and ongoing, reflecting both national trends and local challenges within Midlothian. The IJB continues to face a number of financial risks. A key risk is that partner organisations may not be able to provide sufficient additional funding to support increasing demand and cost pressures. Other Pressures include: Demographic Pressures Midlothian has the second 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. Workforce 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. 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. Page 64 of 160
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25 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. These pressures are not unique to Midlothian and are experienced across Scotland. They include rising costs associated with staff pay and conditions, increasing demand for services, the cost of existing medicines, the introduction of new treatments, and wider inflationary pressures. These factors are reflected in the MIJB’s Medium Term Financial Strategy and will continue to influence future financial planning and decision-making. Strengthening Financial Oversight 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 2026/27, 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. Val de Souza, IJB Chair. Morag Barrow, Chief Officer. Eleonora Ho, Interim Chief Finance Officer Page 65 of 160
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26 Section 2 – Membership and Meetings of the MIJB The IJB met 8 times in 2025/26 for formal business meetings. We also met for 4 IJB Development sessions and 3 financial briefings. The members of the IJB as of March 2026 are as follows: Member Nominated/Appointed by Role Val de Souza Nominated by NHS Lothian Voting Member, Chair Connor McManus Nominated by Midlothian Council 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 George Gordon Nominated by NHS Lothian Voting Member Heather Campbell 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 Paul Bailey 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 Sheree Muir Appointed by the IJB Lived Experience Representative Vacant Volunteer Representative Vacant Carer Representative Notes Chris King was the IJB’s Chief Finance Officer until 26th of March 2026. Eleonora Ho was appointed in April 2026 as Interim Chief Finance Officer until a permanent appointment Page 66 of 160
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27 can be made. Section 95 responsibilities were covered by the Midlothian Council Director of Finance in the interim period. Section 3 – 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. The unaudited accounts were issued on the 30 June 2026 and the audited accounts were authorised for issue on 24 September 2026. Signed on behalf of Midlothian Integration Joint Board. Val de Souza, IJB Chair. Page 67 of 160
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28 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 on 31 March 2026 and the transactions for the year then ended. Eleonora Ho, Interim Chief Finance Officer Page 68 of 160
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29 Section 4 - 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 2025/26 (Previous Year: nil). The Chair of the IJB in 2025/26 was Val de Souza who is a non-executive member of the NHS Lothian Board, the Vice Chair was Councillor Connor McManus (who is an elected member of Midlothian Council). 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 Chair of the IJB in 2025/26 (Previous Year: nil). Page 69 of 160
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30 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 must be appointed and the employing partner must 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, the remuneration of the Chief Finance Officer is disclosed. Chris King was Chief Finance Officer until the 26th of March 2026. He was employed by NHS Lothian and had two roles – Midlothian IJB’s Chief Finance Officer and an operational role in the NHS Lothian Finance team as Finance Business Partner. On that basis, 50% of the total remuneration for Chris King between 1 April 2025 and 26 March 2026 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 2024/25 £ 2025/26 £ Full Year Equivalent £ Morag Barrow - Chief Officer 59,048 62,700 62,700 Chris King - Chief Finance Officer 11,832 43,217 43,817 Page 70 of 160
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31 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 table 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. Pension benefits In Year Pension Contributions for year to: Accrued Pension benefits Name 31 March 2025 £ 31 March 2026 £ Type As at 31 March 2026 £k Difference from 31 March 2025 £k Morag Barrow - Chief Officer 12,241 14,108 Pension 34 4 Lump Sum 86 4 Chris King - Chief Finance Officer 2,662 9,712 Pension 12 3 Lump Sum 0 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 Remuneration Band Number of Employees in Band 2024/25 2025/26 0 £50,000 - £54,999 0 1 £55,000 - £59,999 0 0 £60,000 - £64,999 1 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 2025/26 (2024/25: nil). Page 71 of 160
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32 Val de Souza, IJB Chair. Morag Barrow, Chief Officer. Page 72 of 160
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33 Section 5 – Annual Governance Statement 2025/26 Executive summary and overall governance conclusion The Annual Governance Statement explains the MIJB’s governance arrangements and system of internal control. It also reports on how effective those arrangements were during 2025/26 and how they will continue to be strengthened. The MIJB has reviewed its governance arrangements for 2025/26, including the operation of the Board and Audit and Risk Committee, financial governance, risk management, performance reporting, internal audit, external audit and the wider system of internal control. Based on the assurance received during the year, including Internal Audit’s annual opinion, the MIJB concludes that its core governance arrangements were in place and generally operated effectively during 2025/26. The MIJB considers that these arrangements were fit for purpose in supporting decision-making, accountability, financial oversight, risk management and public reporting. These arrangements operated in a challenging environment. The MIJB continued to face significant financial pressure, rising demand for health and social care services, increasing complexity of need and the need to deliver service transformation. There were also changes in senior finance leadership during the year, with interim arrangements put in place to maintain continuity of Section 95 responsibilities. During 2025/26, improvements were made to strengthen governance arrangements. These included clearer links between the Strategic Plan and financial planning, approval of the Strategic Plan 2025–2035, development of the Medium-Term Financial Strategy, approval of the revised Reserves Policy, strengthened financial monitoring and continued development of risk and performance reporting. The MIJB recognises that further improvement is required in 2026/27. The main areas for continued focus are financial sustainability, delivery and monitoring of transformation, benefits tracking, risk and assurance reporting, complaints handling, and continued strengthening of the Local Code of Corporate Governance. Overall, the MIJB is satisfied that reasonable assurance can be placed on the adequacy and effectiveness of its governance arrangements and system of internal control for 2025/26. The MIJB is committed to ensuring that its governance arrangements remain fit for purpose and continue to support safe, effective, sustainable and person-centred health and social care services in Midlothian. Page 73 of 160
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34 Scope of responsibility The MIJB is responsible for ensuring that its business is conducted in accordance with the law and proper standards. It is also responsible for ensuring that public money is safeguarded, properly accounted for and used economically, efficiently and effectively. To meet this responsibility, the MIJB has established governance arrangements which include a system of internal control. This system is intended to manage risk and support the achievement of the MIJB’s policies, aims and objectives. The MIJB also places reliance on NHS Lothian and Midlothian Council’s systems of internal control, where these support the delivery of delegated functions and compliance with partner policies and procedures. The system of governance and internal control can only provide reasonable, not absolute, assurance. It is designed to manage risk to a reasonable level rather than eliminate all risk of failure to achieve policies, aims and objectives. Governance framework and system of internal control The Board of the MIJB comprises voting members nominated by NHS Lothian and Midlothian Council, alongside non-voting members including the Chief Officer, Chief Finance Officer and professional and stakeholder representatives. The MIJB’s governance framework is based on its Integration Scheme, Standing Orders, Scheme of Delegation, Financial Regulations, Local Code of Corporate Governance, risk management arrangements, audit arrangements and regular reporting to the Board and Audit and Risk Committee. The current MIJB Local Code of Corporate Governance was approved by the Board on 8 April 2021. The Local Code sets out the framework and key principles that support effective governance. It is consistent with the CIPFA/SOLACE Framework, Delivering Good Governance in Local Government (2016), and supporting guidance for Scottish authorities. The Local Code sets out the core governance arrangements that support leadership, decision-making, accountability, financial management, risk management, performance management, internal control, audit and public reporting. These arrangements are publicly available and provide the framework against which the MIJB assesses the effectiveness of its governance arrangements. The main features of the governance framework and internal control system associated with the seven core principles of good governance defined in the MIJB Local Code in existence during 2025/26 included the following. Page 74 of 160
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35 A. 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 Midlothian Council and NHS Lothian in June 2022 and serves as the approved constitution. The Standing Orders were reviewed at the MIJB Audit and Risk Committee in September 2025. No changes were proposed as part of that review and approval by the MIJB Board followed in February 2026. 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, the MIJB is 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. The MIJB is dependent upon arrangements within the partner organisations for areas such as: • ensuring legal compliance in the operation of services; • handling complaints; • ethical awareness training and whistleblowing policies and procedures; • staff appointment and appraisal processes that take account of values and ethical behaviour; • identifying, mitigating and recording conflicts of interest, hospitality and gifts; • procurement of goods and services which are sustainable, represent value for money and reinforce ethical values. Other areas where the MIJB places significant reliance on arrangements in place within the partner organisations are set out in the remainder of this 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 the MIJB Chief Officer, supported by the Chief Finance Officer, Chief Internal Auditor and Board Clerk as appropriate. B. 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. Page 75 of 160
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36 Unless confidential, decisions made by the Board are documented in the public domain. Community engagement was encouraged as part of the development of the Scheme of Integration and the Strategic Plan of the Health and Social Care Integration Joint Board was developed following consultation with interested parties, including members of the public. The Board developed and approved the Midlothian IJB Participation Statement 2025– 2028 in October 2025. This was developed following completion of a self-assessment process using the Healthcare Improvement Scotland Quality Framework for Community Engagement. The Participation Statement sets out how the Board will work alongside people and communities to strategically plan and direct delegated health and social care services. The Midlothian IJB complaints procedure was established in 2017, revised in 2021 and is currently being revised for presentation to the Audit and Risk Committee in 2026. Work is ongoing to revise the complaints process in conjunction with Midlothian Council during 2026. C. Defining outcomes in terms of sustainable economic, social, and environmental benefits The Midlothian Integration Joint Board Strategic Plan 2025–2035 was approved in October 2025. It sets out the IJB’s vision, strategic objectives and intended outcomes. The Plan has been updated to reflect: • ongoing assessment of need; • priorities identified through public consultation; • the economic, social and environmental benefits and challenges expected over the life of the Plan. Delivery of the Plan is supported by the associated Directions. Progress against these Directions is reported to the Board. The Board’s Strategic Plan 2025–2035 was shaped by the Midlothian IJB Joint Strategic Needs Assessment and clearly sets out the outcomes the Board aims to achieve. The Board completes an Equality and Children’s Rights Impact Assessment for all new or revised strategies, plans, policies, provisions or practices where the impact on equality is not already known. All Equality and Children’s Rights Impact Assessments are published on the Midlothian Health and Social Care website. Implications are considered during the decision-making process within the standard report template, covering policy, equalities, resources, risk and involving people. Page 76 of 160
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37 D. Determining the interventions necessary to optimise the achievement of the intended outcomes In determining how services and other courses of action should be planned and delivered, the MIJB has a statutory responsibility to involve patients and members of the public. The MIJB Strategic Plan is based on both routine engagement and statutory consultation to inform its review and update. The statutory consultation plan for the Midlothian IJB draft Strategic Plan was approved by the MIJB in June 2024. Substantial stakeholder consultation was undertaken in the development of the draft Midlothian IJB Strategic Plan 2025–2035. The MIJB issued Directions to the partners in March 2025 for 2025/26 service delivery and for service redesign and recommissioning in line with the transformation programme. E. Developing the entity’s capacity, including the capability of its leadership and the individuals within it The MIJB Chief Officer is responsible and accountable to the Board for all aspects of management, including promoting sound governance and providing quality information and support to inform decision-making and scrutiny. Regular meetings are held between the Chief Officer and the Chair and Vice Chair of the MIJB. The MIJB Chief Officer also meets regularly with representatives from the partner organisations. Members of the MIJB Board are provided with the opportunity to attend development sessions relevant to their role as part of their development programme. The MIJB completed a self-assessment in August 2023 and an improvement plan was approved. Midlothian IJB reviewed this plan in April 2025, with formal approval by the MIJB Board in 2026. A three-year Integrated Workforce Plan 2025–2028 was approved by the MIJB in February 2025 to allow delivery to the Scottish Government in March 2025. This plan is aligned to the MIJB Medium-Term Financial Strategy and supports delivery of the MIJB Strategic Plan 2025–2035 to improve outcomes for people and communities. Midlothian IJB awaits feedback from the Scottish Government, after which an improvement plan and publication date will be agreed. F. Managing risks and performance through robust internal control and strong public financial management The MIJB Chief Officer has overall responsibility for directing and controlling the Partnership to deliver health and social care services. The MIJB Board is responsible for key decision-making. Page 77 of 160
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38 The MIJB has 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 arrangements for monitoring risk management activity and performance. The Strategy was updated and presented to the June 2024 Audit and Risk Committee, with the Risk Management Policy approved by the MIJB Board in October 2024. The Midlothian IJB Performance Framework 2025–2028 accompanies the Strategic Plan and sets out the outcomes and measures that the IJB uses to track and evaluate its performance. Regular risk reporting is completed to the MIJB Audit and Risk Committee. The MIJB Chief Finance Officer is responsible for the proper administration of all aspects of the MIJB’s financial affairs, including ensuring advice is given to the Board on all financial matters. The MIJB’s 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: • counter fraud and anti-corruption arrangements; • management of data in accordance with applicable legislation. G. Implementing good practices in transparency, reporting, and audit to deliver effective accountability The shared Chief Internal Auditor of Midlothian Council was the MIJB’s Chief Internal Auditor for 2025/26. The role of the Chief Internal Auditor is to provide an independent and objective annual opinion on the effectiveness of the MIJB’s internal controls, risk management and governance. This was carried out in conformance with the Global Internal Audit Standards as amended by the UK Public Sector Application Note. The MIJB responds to the findings and recommendations of Internal Audit, External Audit, scrutiny and inspection bodies. The MIJB Audit and Risk Committee is integral to overseeing assurance and monitoring improvements in internal controls, risk management and governance. The Audit and Risk Committee updated its terms of reference in June 2024 and has recruited an independent member in line with CIPFA best practice. Performance reports are regularly presented to the Board for monitoring and control of achievement of improvement goals. An Annual Performance Report for 2024/25 was presented to the IJB Board for review prior to publication in August 2025. Page 78 of 160
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39 The Annual Accounts for 2025/26 set out the financial position in accordance with relevant accounting regulations. Review of adequacy and effectiveness The MIJB is required to conduct an annual review of the effectiveness of its governance framework. The review was informed by: • an annual self-assessment carried out by Internal Audit against the MIJB’s Local Code of Corporate Governance; • Internal Audit reports for the MIJB; • External Audit reports for the MIJB; • relevant reports by other external scrutiny bodies and inspection agencies; • relevant partner Internal Audit and External Audit reports from NHS Lothian and Midlothian Council; • reports to the IJB and Audit and Risk Committee; • financial monitoring and budget reports; • risk management reports; • performance reports; • management assurances; • review of progress against previous governance improvement actions. Based on this assessment, the MIJB concludes that its core governance arrangements were in place and generally operated effectively during 2025/26. The arrangements supported effective oversight of key areas including financial performance, budget setting, risk management, annual accounts preparation, audit activity, strategic planning and statutory reporting. Internal Audit’s Annual Assurance Report was considered as part of this assessment. Internal Audit’s opinion was that the MIJB’s governance arrangements, risk management and systems of internal control were reasonable. Internal Audit noted that very good progress had been made by management during the year in completing recommendations, with only one internal audit recommendation outstanding. Internal Audit also concluded that the MIJB operates under good public sector practice governance arrangements through its Board and committee meetings, which support scrutiny and transparency of decisions. The governance arrangements in place were Page 79 of 160
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40 considered generally sound and being further developed, with improvement mainly required to support the management of increasing financial risks. Internal Audit concluded that effective risk management processes are in place for the MIJB. This included the approved Risk Management Policy, regular review and reporting of the strategic risk register, scrutiny by the Audit and Risk Committee and reporting to the Board. The one remaining Internal Audit recommendation relates to developing a more explicit link between the Medium-Term Financial Plan and the MIJB Strategic Plan. Progress has been made through the approval of the Strategic Plan 2025–2035 and the Medium-Term Financial Strategy 2025–2028, but further work will continue during 2026/27 to ensure that financial planning, transformation and strategic priorities are clearly aligned. Overall, the MIJB is satisfied that the governance framework provided reasonable assurance that arrangements were operating effectively during 2025/26. The MIJB also recognises that the scale of financial and operational challenge requires continued strengthening of governance, particularly in relation to financial sustainability, transformation delivery, risk management and assurance reporting. Governance improvements during 2025/26 The MIJB made a number of improvements to governance arrangements during 2025/26. These improvements respond to issues identified in previous governance reporting and reflect the need to strengthen oversight in a more challenging operating environment. Key improvements included: Strategic planning and Directions The Midlothian Health and Social Care Integration Joint Board Strategic Plan 2025–2035 was approved in October 2025. The Plan sets out the IJB’s vision, strategic objectives and intended outcomes. It was shaped by the Midlothian Joint Strategic Needs Assessment and through consultation and engagement with partners, stakeholders and communities. The Strategic Plan is supported by formal Directions to NHS Lothian and Midlothian Council. Directions were issued in March 2025 for 2025/26 service delivery, service redesign and recommissioning in line with the transformation programme. Participation and engagement The Board developed and approved the Midlothian IJB Participation Statement 2025– 2028 in October 2025. This followed a self-assessment process using the Healthcare Improvement Scotland Quality Framework for Community Engagement. The Participation Statement sets out how the Board will work alongside people and communities to strategically plan and direct delegated health and social care services. Page 80 of 160
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41 Financial planning and oversight The Medium-Term Financial Strategy 2025–2028 was approved at the special Board meeting in March 2026. It provides a clearer link to the Strategic Plan 2025–2035 and identifies strategic financial priorities. Financial monitoring continued to be strengthened to provide clearer reporting on the in-year financial position, financial pressures, recovery actions and the level of partner support required to achieve financial balance. Financial recovery monitoring Financial recovery actions continued to be developed and monitored through governance arrangements. Internal Audit confirmed that recommendations from the Recovery Plan Monitoring audit had been implemented, with financial reporting updated to reflect progress from February 2025. Ongoing monitoring by the IJB Board will remain important because delivery of recovery plans continues to be a significant financial risk. Reserves arrangements The IJB Reserves Policy was updated and approved by the Audit and Risk Committee in September 2025. This strengthened the governance framework for the purpose, use and monitoring of reserves and supports closer alignment between reserves, Directions and agreed priorities. Audit and Risk Committee arrangements The Audit and Risk Committee continued to provide oversight of annual accounts, audit activity, risk management, financial governance and improvement actions. The Committee’s terms of reference were updated in June 2024. An independent member was also recruited in line with CIPFA best practice. Board self-assessment and governance development The IJB Board completed a self-assessment in August 2023 and refreshed this in May 2025. The improvement plan was reviewed in April 2025, with formal approval by the Board due in 2026. Risk management The Risk Management Policy was revised during the year. It was considered by the Audit and Risk Committee in June 2024 and approved by the IJB Board in October 2024. Regular risk reporting continued to be provided to the Audit and Risk Committee and Board. Performance reporting The Midlothian IJB Performance Framework 2025–2028 was developed alongside the Strategic Plan. It sets out the outcomes and measures that the IJB will use to track and Page 81 of 160
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42 evaluate performance. Performance reporting continued through regular Board reports and the Annual Performance Report. These improvements have strengthened the MIJB’s governance arrangements. Further work is required in 2026/27 to ensure that governance continues to support delivery, improvement and financial sustainability. Governance improvement areas The MIJB has not identified any governance issue that fundamentally undermined the operation of its governance framework during 2025/26. However, the annual review has identified areas where further improvement is required to enhance governance arrangements and support compliance with the Local Code. 1. Strategic planning supporting documents The Internal Audit of the IJB strategic planning process identified that IJB management should ensure that the Consultation and Engagement Statement, Housing Contribution Statement and Market Facilitation Plan were finalised as soon as possible. These were finalised and presented to the IJB Board in October 2025. 2. Financial sustainability The MIJB Medium-Term Financial Strategy 2025–2028, approved at the March 2026 IJB Board, projects a £13.68 million annual overspend by the 2028/29 financial year. Continued focus on transformation and feedback processes is therefore required to ensure financial sustainability of the MIJB. 3. Complaints process The MIJB review of the complaints process and policy remains to be completed in conjunction with Midlothian Council. 4. Transformation delivery and benefits tracking Transformation is central to the MIJB’s ability to improve outcomes and support financial sustainability. The MIJB will need to ensure that transformation activity is supported by clear governance, agreed objectives, expected benefits, timescales, risks, performance measures and financial impacts. During 2026/27, the MIJB will strengthen transformation reporting and benefits tracking to provide clearer assurance on whether transformation activity is delivering the intended operational, financial and service outcomes. 5. Links between strategic and financial planning Internal Audit identified the need to strengthen the explicit link between the Medium- Term Financial Plan and the Strategic Plan. Progress has been made through approval of the Strategic Plan 2025–2035 and Medium-Term Financial Strategy 2025–2028. Page 82 of 160
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43 Further work is required to ensure that financial planning, transformation priorities and formal Directions are clearly aligned. 6. Risk management and assurance The MIJB has established risk management arrangements, including an approved Risk Management Policy and strategic risk register. However, the increasing complexity of the operating environment means that risk reporting and assurance need to continue to evolve. Further development will focus on ensuring that strategic risks are clearly linked to financial sustainability, service performance, transformation delivery, workforce capacity and partnership dependencies. 7. Senior finance leadership and Section 95 arrangements During the year there were changes in senior finance leadership. Chris King was the Chief Finance Officer until 26 March 2026. Eleonora Ho was appointed in April 2026 as Interim Chief Finance Officer until a permanent appointment can be made. The MIJB ensured continuity of Section 95 responsibilities through interim arrangements. Maintaining clear financial leadership, capacity and resilience remains a key governance priority. The implementation of these actions to enhance governance arrangements in 2026/27 will be driven and monitored by the MIJB Chief Officer and Chief Finance Officer to inform the next annual review. Internal Audit work planned in 2026/27 is designed to test improvements and compliance in governance. Governance outlook for 2026/27 The MIJB’s governance arrangements will need to continue to adapt during 2026/27 to respond to financial, operational and strategic challenges. The governance outlook is focused on ensuring that arrangements remain fit for purpose and provide clear oversight of the areas that matter most for sustainability, performance and public accountability. During 2026/27, the main governance priorities will be: • the refresh and approval of the MIJB Local Code of Corporate Governance; • continued delivery and monitoring of the 2026/27 financial plan and recovery actions; • continued development and use of the Medium-Term Financial Strategy; • stronger links between the Strategic Plan, Medium-Term Financial Strategy, Directions and transformation programme; Page 83 of 160
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44 • strengthening transformation governance, including benefits tracking and reporting; • continued monitoring of the financial sustainability risk; • further development of risk management and assurance reporting; • implementation and monitoring of the revised Reserves Policy; • completion of the complaints process and policy review; • continued oversight of senior finance leadership and Section 95 arrangements; • continued scrutiny by the Audit and Risk Committee of audit recommendations and governance improvement actions; • further development of performance reporting to link activity, outcomes, quality, finance and risk. The MIJB recognises that the scale of transformation and financial recovery required will involve difficult decisions. Governance arrangements will therefore need to support open discussion, clear evidence, effective scrutiny and transparent reporting. The MIJB will continue to work closely with NHS Lothian, Midlothian Council, staff, providers, people who use services, unpaid carers and communities to ensure that decisions are informed, lawful, transparent and focused on improving outcomes for people in Midlothian. Conclusion and opinion on assurance The MIJB has reviewed its governance arrangements for 2025/26 and concludes that its core governance arrangements were in place and generally operated effectively. It is our opinion that reasonable assurance can be placed on the adequacy and effectiveness of the MIJB’s governance arrangements and system of internal control for 2025/26. The MIJB considers that these arrangements were fit for purpose in supporting decision-making, accountability, financial oversight, risk management and public reporting during the year. The MIJB also recognises that governance arrangements must continue to strengthen in response to the significant financial, operational and transformation challenges facing health and social care. Further improvement is required to fully demonstrate compliance with the MIJB’s Local Code and to support delivery of the MIJB’s principal objectives. Systems are in place to regularly review and improve governance arrangements and the system of internal control. During 2026/27, the MIJB will focus on strengthening financial sustainability, transformation delivery, risk and assurance reporting, performance oversight, complaints handling and implementation of audit recommendations. Page 84 of 160
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45 These actions will support the continued development of governance arrangements that are proportionate, transparent, effective and fit for purpose in supporting safe, effective and sustainable health and social care services for the people of Midlothian. Val de Souza, Chair Morag Barrow, Chief Officer Page 85 of 160
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46 Section 6 – 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 2026 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 2025/26 (the 2025/26 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 2026 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 2025/26 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 were 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 86 of 160
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47 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 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 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 87 of 160
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48 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 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 88 of 160
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49 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 89 of 160
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50 have responsibilities to members or officers, in their individual capacities, or to third parties. [Signature] Claire Gardiner, CPFA Audit Director, Audit Scotland, 4th Floor 102 West Port Edinburgh EH3 9DN [Full date] Page 90 of 160
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51 Section 7 – Financial Statements Section 7.1 - Comprehensive Income and Expenditure Statement This statement shows the cost of providing services for the year in accordance with accepted accounting practices. IJB Comprehensive Income and Expenditure Statement 2024/25 Net Expenditure £000's 2025/26 Net Expenditure £000's 135,018 Health Care Services - NHS Lothian 144,277 69,483 Social Care Services - Midlothian Council 74,575 204,501 Cost of Services 218,852 (204,650) Taxation and Non-Specific Grant Income (219,697) (149) (Surplus)/Deficit on Provision of Services (845) 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. Section 7.2 - Movement in Reserves Statement This statement shows the movement in-year of reserves held by the Midlothian Integration Joint Board. Movement in Reserves Notes to the Accounts 31/03/2026 £000's 31/03/2025 £000's Usable Reserves - brought forward (948) (799) Deficit/(Surplus) on provision of services (845) (149) Closing Balance, carried forward 1.8 (1,793) (948) Page 91 of 160
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52 Movement in Reserves Earmarked Reserves £000's General Reserves £000's Total Reserves £000's Opening Balance - 31/3/2025 (948) 0 (948) Drawdown of Reserve in year 941 0 941 Additions to Reserve in year (1,786) 0 (1,786) Closing Balance - 31/3/2026 (1,793) 0 (1,793) Section 7.3 - 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 31/03/2025 £000's Balance Sheet Notes to the Accounts 31/03/2026 £000's Net Current Assets 948 Debtors 6 1,793 948 Total assets less current liabilities 1,793 Capital and Reserves (948) Earmarked Reserves 1.8 (1,793) 0 General Reserves 1.8 0 (948) Total Reserves (1,793) The unaudited accounts were issued on the 30 June 2026 and the audited accounts were authorised for issue on 24 September 2026. Eleonora Ho, Interim Chief Finance Officer Page 92 of 160
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53 Section 7.4 - Notes to the Financial Statements 1. Significant Accounting Policies 1.1. General Principles The Financial Statements summarise the IJB’s transactions for the 2025/26 financial year and its position at the year-end of 31 March 2026. 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 2025/26, supported by International Financial Reporting Standards (IFRS), unless legislation or statutory guidance requires different treatment. The accounts are prepared on a going concern basis, which assumes that the IJB will continue in operational existence for the foreseeable future. The historical cost convention has been adopted. 1.2. Basis of Preparation The IJB financial statements for 2025/26 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 (2025/26), 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 functions 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 2026/27, and a medium-term financial plan has been prepared through to 2029. 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. 1.3. 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 • 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 recovered, the balance of debtors is written down Page 93 of 160
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54 1.4. 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. 1.5. 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’s figure” on the balance sheet. 1.6. Debtors and Creditors The funding balance due to or from each funding partner as at 31 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. 1.7. 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. 1.8. 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 31 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 31 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 31 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. The IJB has none of the above. Page 94 of 160
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55 1.9. 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 of 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 £1,793,000 as of 31 March 2026. General Fund 31/03/2025 £000's Movement £000's 31/03/2026 £000's Earmarked Reserves Embedding a gender informed effective response to domestic abuse project (7) 0 (7) Unscheduled Care (941) (845) (1,786) General Reserves 0 0 0 Total Usable Reserves (948) (845) (1,793) 1.10. 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 2025/26 was £3,000 (PY £3,000). Unlike NHS Boards, the IJB does not have any ‘shared risk’ exposure from participation in CNORIS. The IJB’s participation in the CNORIS scheme is therefore analogous to normal insurance arrangements. Known claims are assessed as to the value and probability of settlement. Where it is material, the overall expected value of known claims taking probability of settlement into consideration is provided for in the 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. There are no outstanding claims or any indications that any claims are to be made against the IJB. 1.11. 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 Page 95 of 160
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56 adopted and could have a material impact on the accounts. This applies to new or amended standards within the 2025/26 Code. There are no new or amended Accounting Standards issued but not yet adopted that will have a material impact on the 2025/26 Annual Accounts. 1.12. 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’ opinion that a transfer of economic benefits will be required, material contingent liabilities have been disclosed (there are none). • The Annual Accounts contain 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 2026 for which there is a significant risk of material adjustment in the forthcoming financial year. 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. 2. Subsequent Events In accordance with the requirements of International Accounting Standard 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 are 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 Page 96 of 160
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57 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. 3. Expenditure and Funding Analysis The Expenditure and Funding Analysis shows how the funding available to the IJB, in the form of partner contributions, has been used in providing services. 2024/25 Net Expenditure £000's 2025/26 Net Expenditure £000's 33,280 Joint Older People Services 34,418 7,246 Joint Mental Health Services 7,550 26,080 Joint Learning Disability Service 28,992 1,000 Joint Alcohol and Drugs Service 1,136 4,235 Physical Disability Service 4,922 31,420 Primary Care 36,758 22,325 Prescribing 22,295 7,298 Community Hospitals 7,542 11,948 Community Nursing 12,230 10,568 Other Core Health Services 9,891 7,748 Other Hosted Services 8,116 13,679 Non-Cash Limited 14,798 20,728 Health Set Aside 22,611 6,947 Other Social Care 7,593 204,501 Cost of Services 218,852 (204,650) Delegated Funding (219,697) (149) (Surplus) or Deficit on Provision of Services (845) (799) Opening General Fund Balance (948) (149) (Surplus) or Deficit in Year (845) (948) Closing General Fund Balance (1,793) 4. Corporate Service Included in the above costs are the following corporate services: Corporate Costs 2024/25 £000's 2025/26 £000's Staff (Chief Officer) 59 63 CNORIS 3 3 Audit fee 34 35 Total 96 101 Page 97 of 160
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58 As noted in the Remuneration Report, the Chief Finance Officer is not charged to the IJB. 5. 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 MIJB, 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. In the 2025/26 financial year the following transactions were made with NHS Lothian and Midlothian Council relating to integrated Health and Social Care functions. Income received from the two parties: 2024/25 £k 2025/26 £k NHS Lothian 135,578 145,122 Midlothian Council 69,072 74,575 Total 204,650 219,697 Expenditure relating to the two parties: 2024/25 £k 2025/26 £k NHS Lothian 135,018 144,277 Midlothian Council 69,483 74,575 Total 204,501 218,852 There are elements of expenditure which are shown against NHS Lothian, but where the resources are used for the Social Care services delivered by Midlothian Council, in particular, these include resource transfers and social care funds. A breakdown of these resources is given in the table below: 2024/25 2025/26 £k £k Social Care Fund 4,816 4,816 Resource Transfers 6,941 6,227 Total 11,757 11,043 Page 98 of 160
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59 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 and are provided by the Council and the Health Board free of charge as a ‘service in kind’. This is consistent with VAT advice and means that support services to the IJB are outside the scope of VAT. However, they remain essential to maintaining the IJB’s operational infrastructure. These services include but are not limited to: • Human Resources • Internal Audit and Risk Management • Information Technology • Building Accommodation • Property / Facilities Management • Learning and Development • Health and Safety • Committee Services • Procurement Services • Financial Services • Corporate Communications • Legal Services 6. Short-Term Debtors Partner 2024/25 £000's 2025/26 £000's Funding due from NHS Lothian 941 1,786 Funding due from Midlothian Council 7 7 Total 948 1,793 7. 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 exclude 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 99 of 160
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4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 Email: info@audit.scot www.audit.scot Audit and Risk Committee 10 September 2026 Midlothian Integration Joint Board Audit of the 2025/26 annual accounts Independent Auditor’s Report 1. My audit work on the 2025/26 annual accounts is now substantially complete. Subject to the receipt of a revised set of annual accounts for final review, I anticipate being able to issue unmodified audit opinions in the Independent Auditor's Report on 10 September 2026. The proposed Independent Auditor’s Report is attached at Appendix A. Annual Audit Report 2. Under International Standards on Auditing in the UK (ISA (UK)), I am required to report specific matters identified from the audit of the annual accounts to those charged with governance of Midlothian Integration Joint Board in sufficient time to enable appropriate action. For Midlothian Integration Joint Board, those charged with governance is the Audit and Risk Committee. I present for the committee's consideration my draft Annual Audit Report on the 2025/26 audit. The section headed "Significant findings and key audit matters" sets out the issues identified in respect of the annual accounts, including those that I am required to report to you. 3. The Annual Audit Report also sets out conclusions on the wider scope areas that frame public audit as set out in the Code of Audit Practice. 4. The Annual Audit Report will be issued in final form after the audit of the annual accounts has been completed. Uncorrected misstatements 5. I also report to those charged with governance all uncorrected misstatements in the annual accounts which I have identified during the course of my audit, other than those of a trivial nature, and request that these misstatements be corrected. 6. There are no uncorrected misstatements to report. Other ISA (UK) matters 7. In presenting this letter and the Annual Audit Report to the Audit and Risk Committee, I seek confirmation from those charged with governance on the following matters: MIJB – Audit and Risk Committee Thursday 10th September 2026 Item No 5.3 Page 101 of 160
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• if they are aware of any instances of actual, suspected, or alleged fraud, • if they are aware of any subsequent events that have occurred since the date of the financial statements, • if they are content that the methods, assumptions, and data used in making accounting estimates in the annual accounts are appropriate, • if all related party relationships and transactions they are aware of are reflected in the annual accounts, and • if they are aware of any non-compliance with laws and regulations. 8. Any issues that I have identified from my audit in relation to other ISA (UK) matters that I am required to report to those charged with governance have been reported in the section headed “Other matters to report” in the Annual Audit Report. Representations from the Section 95 Officer 9. As part of the completion of the audit, I am seeking written representations from the Interim Chief Finance Officer, who is the Section 95 Officer, on aspects of the annual accounts, including the judgements and estimates made. 10. A draft letter of representations is attached at Appendix B. This should be signed and returned to me by the Section 95 Officer with the signed annual accounts prior to the Independent Auditor’s Report being signed. Page 102 of 160
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Appendix A: Proposed 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 2026 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 2025/26 (the 2025/26 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 2026 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 2025/26 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 were not provided to the Midlothian Integration Joint Page 103 of 160
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Board. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. 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 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 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 Page 104 of 160
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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 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 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 Page 105 of 160
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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 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). Page 106 of 160
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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 have responsibilities to members or officers, in their individual capacities, or to third parties. Claire Gardiner, CPFA Audit Director, Audit Scotland, 4th Floor 102 West Port Edinburgh EH3 9DN Page 107 of 160
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Appendix B: Letter of Representations (ISA (UK) 580) [the Section 95 Officer should reproduce this on the audited body’s letterhead] Claire Gardiner, CPFA Audit Director Audit Scotland 4th Floor 102 West Port Edinburgh EH3 9DN Midlothian Integration Joint Board Annual accounts 2025/26 Dear Claire This representation letter is provided in connection with your audit of the annual accounts of Midlothian Integration Joint Board, for the year ended 31 March 2026 for the purpose of expressing an opinion as to whether the financial statements give a true and fair view and have been properly prepared, and for expressing other opinions on the Remuneration Report, Management Commentary, and Annual Governance Statement. I confirm to the best of my knowledge and belief, and having made such enquiries as I considered necessary, the following representations given to you in connection with your audit of Midlothian Integration Joint Board annual accounts for the year ended 31 March 2026. General I have fulfilled my responsibilities for the preparation of the 2025/26 annual accounts as set out in your 2025/26 Annual Audit Plan. All the accounting records, documentation, and other matters which I am aware are relevant to the preparation of the annual accounts have been made available to you for the purposes of your audit. All transactions undertaken by Midlothian Integration Joint Board have been recorded in the accounting records and are properly reflected in the financial statements. I confirm that the effects of uncorrected misstatements are immaterial, individually and in aggregate, to the financial statements as a whole. I am not aware of any uncorrected misstatements. Financial Reporting Framework The annual accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2025/26 (2025/26 Code), mandatory guidance from LASAAC, and the Page 108 of 160
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requirements of the Local Government (Scotland) Act 1973, the Local Government in Scotland Act 2003, and the Local Authority Accounts (Scotland) Regulations 2014. In accordance with the Local Authority Accounts (Scotland) Regulations 2014, I have ensured that the financial statements give a true and fair view of the financial position of Midlothian Integration Joint Board at 31 March 2026 and the transactions for 2025/26. Accounting Policies and Estimates All material accounting policies applied are as shown in the note included in the financial statements. The accounting policies are determined by the 2025/26 Code, where applicable. Where the 2025/26 Code does not specifically apply, I have used judgement in developing and applying an accounting policy that results in information that is relevant and reliable. All accounting policies applied are appropriate to Midlothian Integration Joint Board’s circumstances and have been consistently applied. The methodology, significant assumptions, and data used in making accounting estimates are reasonable, and have been properly reflected and disclosed in the financial statements in accordance with the 2025/26 Code. Judgements made in making estimates have been based on the latest available and reliable information. Estimates have been revised where there are changes in the circumstances on which the original estimate was based or as a result of new information or experience. Going Concern Basis of Accounting I have assessed Midlothian Integration Joint Board’s ability to continue to use the going concern basis of accounting and have concluded that it is appropriate. I am not aware of any material uncertainties that may cast significant doubt on Midlothian Integration Joint Board’s ability to continue to adopt the going concern basis of accounting. Assets All assets at 31 March 2026 of which I am aware have been reported in the financial statements. Liabilities All liabilities at 31 March 2026 of which I am aware have been reported in the financial statements. Contingent Liabilities There are no significant contingent liabilities to the financial statements, arising either under formal agreement or through formal undertakings requiring disclosure in the financial statements. Page 109 of 160
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Litigation and Claims All known actual or possible legal claims have been disclosed to you and have been accounted for and disclosed in the financial statements in accordance with the 2025/26 Code. Fraud I understand my responsibilities for the design, implementation, and maintenance of internal control to prevent fraud and I believe I have appropriately fulfilled those responsibilities. I have provided you with all information in relation to: • my assessment of the risk that the financial statements may be materially misstated as a result of fraud, • any allegations of fraud or suspected fraud affecting the financial statements, and • fraud or suspected fraud that I am aware of involving management, employees who have a significant role in internal control, or others that could have a material effect on the financial statements. Laws and Regulations I have disclosed to you all known instances of non-compliance or suspected non-compliance with laws and regulations whose effects should be considered when preparing financial statements. Related Party Transactions All material transactions with related parties have been appropriately accounted for and disclosed in the financial statements in accordance with IAS 24, as adopted by the 2025/26 Code. I have made available to you the identity of all of Midlothian Integration Joint Board’s related parties and all the related party transactions of which I am aware. Page 110 of 160
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Remuneration Report The Remuneration Report has been prepared in accordance with the Local Authority Accounts (Scotland) Regulations 2014, and all required information of which I am aware has been provided to you. Management Commentary I confirm that the Management Commentary has been prepared in accordance with statutory guidance, and the information is consistent with the financial statements. Corporate Governance I confirm Midlothian Integration Joint Board has undertaken a review of the system of internal control during 2025/26 to establish the extent to which it complies with proper practices set out in Delivering Good Governance in Local Government: Framework 2016. I have disclosed to you all deficiencies in internal control identified from this review or of which I am otherwise aware. I confirm that the Annual Governance Statement has been prepared in accordance with the Delivering Good Governance in Local Government: Framework 2016 and the information is consistent with the financial statements. There have been no changes in the corporate governance arrangements, or issues identified, since 31 March 2026 which require to be reflected in the Annual Governance Statement or annual accounts. Events Subsequent to the Date of the Balance Sheet All events subsequent to 31 March 2026 for which IAS 10, as adopted by the 2025/26 Code, requires adjustment or disclosure have been adjusted or disclosed. Yours sincerely Eleonora Ho Interim Chief Finance Officer Page 111 of 160
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Midlothian Integration Joint Board 2025/26 Annual Audit Report Prepared for Midlothian Integration Joint Board and the Controller of Audit September 2026 Page 113 of 160
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Midlothian Integration Joint Board: 2025/26 Annual Audit Report | 2 Contents Summary of audit opinions and conclusions 3 Introduction 4 Audit scope, responsibilities, and fee 5 Audit of the annual accounts 7 Wider scope and Best Value audit 14 Appendix 1: Action plan 2025/26 22 Appendix 2: National and performance audit reports 26 Accessibility You can find out more and read this report using assistive technology on our website www.audit.scot/accessibility. Page 114 of 160
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Summary of audit opinions and conclusions | 3 Summary of audit opinions and conclusions 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 has effective and appropriate arrangements in place for Financial Management; Vision, Leadership and Governance; and Use of Resources to Improve Outcomes. However, significant financial sustainability risks remain and future funding gaps present serious challenges to the long- term sustainability of services. 4 Midlothian IJB reported a surplus of £0.845 million in its service provision for 2025/26. However, additional funding of £4.3 million was provided in year to meet operational overspends. 5 While financial planning arrangements are appropriate, Midlothian IJB faces significant financial sustainability risks. Delivery of transformation savings and continued support from partner bodies will be critical to maintaining sustainable health and social care services over the medium term. 6 Midlothian IJB has effective and appropriate arrangements in place for securing Best Value. Page 115 of 160
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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 2025/26 audit of Midlothian Integration Joint Board’s annual accounts and the wider scope areas specified in the Code of Audit Practice (2021). 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. Appointed auditor and independence 3. Claire Gardiner, of Audit Scotland, has been appointed as external auditor of the body 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 116 of 160
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Audit scope, responsibilities, and fee | 5 Audit scope, responsibilities, and fee 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. Page 117 of 160
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Audit scope, responsibilities, and fee | 6 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. 9. The Annual Audit Report includes an agreed action plan at Appendix 1 setting out specific recommendations to address matters identified and includes details of the responsible officer and dates for implementation. Midlothian IJB’s responsibilities 10. 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 give 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. Audit Fee 11. The audit fee for the 2025/26 audit was reported in the Annual Audit Plan and was set at £35,480 (2024/25: £34,000). Several errors and qualitative issues were identified in the unaudited accounts. These issues resulted in additional audit work being undertaken. As a result, an additional audit fee of £3,500 was charged to cover the additional audit work, resulting in a total audit fee of £38,980. National performance audit reporting 12. 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 and Risk Committee. Details of national and performance audit reports published over the last year can be seen in Appendix 2 . Page 118 of 160
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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 13. Midlothian IJB annual accounts were approved by the Board on the 24 September 2026 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 14. The unaudited annual accounts and supporting working papers were received on 17 June 2026, in line with the agreed audit timetable. However, our audit identified several errors, instances of non-compliance with guidance and legislation, and inconsistencies in the accounts. 15. Recurring changes in senior finance leadership have continued to present challenges in maintaining organisational knowledge and ensuring consistent application of accounting guidance and legislative requirements. Management responded positively to the matters identified during the audit and revised the Management Commentary, the Comprehensive Income and Expenditure Statement, and notes three and five to the accounts. We are satisfied that the audited annual accounts are free from material misstatement. Materiality 16. 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. 17. The concept of materiality is applied 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 Page 119 of 160
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Audit of the annual accounts | 8 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. 18. 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. These revised materiality levels are shown in Exhibit 1. Exhibit 1 2025/26 Materiality levels for Midlothian IJB Materiality £ million Materiality – set at 2% of gross expenditure £4.3 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. £3.2 million Reporting threshold – set at 5% of materiality. £0.21 million Source: Audit Scotland Significant findings and key audit matters 19. 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. 20. 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. 21. 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. Page 120 of 160
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Audit of the annual accounts | 9 22. The significant findings and key audit matters to report are outlined in Exhibit 2. Exhibit 2 Significant findings and key audit matters Significant findings and key audit matters Outcome Inconsistencies between NHS expenditure figures in the unaudited accounts and the Constituent body’s assurance letter A discrepancy was identified between the NHS expenditure figures reported in the Comprehensive Income and Expenditure Statement and Note 3 of the unaudited accounts and the corresponding figures included in the assurance letter received from the Health Board. This issue was previously reported in 2022/23 and 2023/24 and has reoccurred in the current year. The discrepancy indicates that balances had not been fully reconciled to supporting assurance prior to submission of the unaudited accounts. This increases the risk of inaccurate financial reporting and requiring amendment during the account’s preparation process. 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 and figures in the unaudited accounts reconcile to each other. Management revised the annual accounts and we are satisfied that the issues identified have been addressed for the current year; however, the recurrence of this finding highlights the need for robust review and reconciliation processes to prevent similar issues arising in future years. Public inspection notice Section 195(b) of the Local Government (Scotland) Act 1973 requires the public inspection notice to be displayed in a conspicuous place within the authority's area or published in a newspaper circulating within that area. During our review, we noted that Midlothian IJB published the public inspection notice solely on its website. While this supports public accessibility, it does not fully comply with the requirements of Section 195(b) of the Local Government (Scotland) Act 1973. Recommendation 1 (refer Action Plan) Management should ensure that future public inspection notices are published in accordance with the requirements of Section 195(b) of the Local Government (Scotland) Act 1973. This should include displaying the notice in one or more conspicuous places within the authority's area or publishing the notice in a newspaper circulating within the area, in addition to any publication on the IJB's website. Source: Audit Scotland Qualitative aspects of accounting practices 23. ISA (UK) 260 also requires auditors to communicate their view about qualitative aspects of Midlothian IJB’s accounting practices, including Page 121 of 160
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Audit of the annual accounts | 10 accounting policies, accounting estimates, and disclosures in the financial statements. Accounting policies 24. The appropriateness of accounting policies adopted by Midlothian IJB was assessed as part of the audit. These were 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 25. Accounting estimates are used in Midlothian IJB’s financial statements. Audit work considered the processes Midlothian IJB has in place for developing 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 26. As part of our audit, we assessed the adequacy of disclosures within the financial statements. While the disclosures were generally appropriate, the Management Commentary in the unaudited accounts (referenced as the Performance Report) did not provide sufficient analysis of financial performance and contained several disclosures that lacked clarity and supporting explanation. This included the narrative relating to additional funding received from partners and the resulting movements in earmarked reserves. 27. We also identified that the Annual Governance Statement required additional disclosures to achieve full compliance with the Good Governance Addendum. 28. Management subsequently revised both the Management Commentary and the Annual Governance Statement to address these matters. We are satisfied that the disclosures included in the audited financial statements are appropriate and meet the required standards. 29. The disclosure weaknesses and inconsistencies identified in the unaudited accounts (refer to paragraph 14) were not identified through the existing governance and scrutiny arrangements. Strengthening the level of review undertaken by officers and those charged with governance would support the preparation of more complete and transparent financial reporting. Page 122 of 160
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Audit of the annual accounts | 11 Recommendation 2 Management should strengthen the annual accounts preparation and governance review process to ensure that the financial statements are subject to a comprehensive review by members before submission to audit. Audit adjustments 30. Audit adjustments were required to the financial statements to correct misstatements that were identified from the audit. Details of all audit adjustments greater than the reporting threshold of £0.21 million are outlined in Exhibit 3. Exhibit 3 Audit adjustments Details Financial statements lines impacted Comprehensive Income and Expenditure Statement (CIES) Balance Sheet Audit adjustments to financial statements Dr Cr Dr Cr £000 £000 £000 £000 1. Adjustment to correct understated funding from NHS Lothian and understated expenditure on services commissioned from NHS Lothian Health Care Services - NHS Lothian 845 Taxation and Non- Specific Grant Income 845 Net impact on financial statements 845 845 Source: Audit Scotland 31. Management of Midlothian IJB processed audit adjustments for all misstatements identified greater than the reporting threshold. As a result, there are no uncorrected misstatements to report. Page 123 of 160
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Audit of the annual accounts | 12 Significant risks of material misstatement identified in the Annual Audit Plan 32. 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 4. Exhibit 4 Significant risks of material misstatement to the financial statements Risk of material misstatement Planned audit response Outcome of audit work 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. The audit team: • Evaluated the design and implementation of controls over journal entry processing. • Made inquiries of individuals involved in the financial reporting process about inappropriate or unusual activity relating to the processing of journal entries. • Evaluated significant transactions outside the normal course of business. • Assessed the adequacy of controls in place for identifying and disclosing related party relationships and transactions in the financial statements. • Assessed changes to the methods and underlying assumptions used to prepare accounting estimates and assess these for evidence of management bias. • We obtained assurances from the constituent bodies and 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. • We did not identify any significant deficiencies regarding the controls in place for identifying related parties. Minor improvements to the related party disclosures were recommended. • We assessed changes to methods and assumptions used to prepare accounting estimates and did not identify any Page 124 of 160
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Audit of the annual accounts | 13 Risk of material misstatement Planned audit response Outcome of audit work indication of management bias. Source: Audit Scotland Prior year recommendations 33. Progress in implementing prior year audit recommendations has been slower than anticipated. Of the five recommendations raised, two have been fully implemented, with the remaining three still outstanding at the time of this review. While management has taken some initial steps to address the actions, the overall pace of implementation has been limited. 34. As a result, the risks and control weaknesses identified in the previous two years’ audits continue to exist. Management should prioritise the completion of the outstanding actions and establish clear delivery plans to accelerate implementation. For actions not yet implemented, revised responses and timescales have been agreed with Midlothian IJB and are outlined in Appendix 1. Page 125 of 160
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Wider scope and Best Value audit | 14 Wider scope and Best Value audit Conclusion Midlothian IJB has effective and appropriate arrangements in place for Financial Management; Vision, Leadership and Governance; and Use of Resources to Improve Outcomes. However, significant financial sustainability risks remain and future funding gaps present serious challenges to the long-term sustainability of services. Midlothian IJB reported a surplus of £0.845 million in its service provision for 2025/26. However, additional funding of £4.3 million was provided in year to meet operational overspends. While financial planning arrangements are appropriate, Midlothian IJB faces significant financial sustainability risks. Delivery of transformation savings and continued support from partner bodies will be critical to maintaining sustainable health and social care services over the medium term. Midlothian IJB has effective and appropriate arrangements in place for securing Best Value. Audit approach to wider scope and Best Value Wider scope 35. As reported in the Annual Audit Plan, the wider scope audit areas are: • Financial Management. • Financial Sustainability. • Vision, Leadership and Governance. • Use of Resources to Improve Outcomes. 36. Audit work is performed on these four 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. Page 126 of 160
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Wider scope and Best Value audit | 15 Best Value 37. 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. 38. 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. 39. Consideration of the arrangements the body has in place to secure Best Value has been carried out alongside the wider scope audit. Financial Management and Sustainability Additional funding from partner bodies was required to achieve a breakeven financial position 40. Midlothian IJB reported a surplus of £0.845 million in its service provision for 2025/26. However, additional funding of £4.3 million was provided in year to meet operational overspends. 41. Midlothian IJB approved its 2025/26 budget in March 2025. The budget was set at £176 million, comprising £105 million of proposed funding from NHS Lothian and £71 million of approved funding from Midlothian Council. The budget included planned savings of £6 million, leaving a £7 million funding gap to be addressed through in year recovery actions. In March 2025, recovery actions totalling £6 million were identified, reducing the remaining budget gap to £1 million. However, by quarter 3, the IJB was forecasting that only around 75 per cent of these recovery actions would be achieved, resulting in a forecast overspend of £1.5 million. 42. In year, Midlothian IJB incurred operational overspends in both Health and Social Care services of £1.5 million and £2.8 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. 43. Despite an operational overspend within Health, year-end funding of £1.5 million from NHS Lothian, including £0.8 million for unscheduled care which was not utilised in year, resulted in Midlothian IJB reporting a surplus of £0.8 million at year-end. This increased total reserve balances to £1.8 million as at 31 March 2026. Page 127 of 160
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Wider scope and Best Value audit | 16 Financial management and reporting arrangements are effective and allow members and officers to scrutinise the budget effectively 44. 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. 45. 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 Midlothian IJB has appropriate financial management and reporting arrangements in 2025/26. Midlothian IJB has appropriate financial control arrangements in place 46. 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. 47. 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. Midlothian IJB’s reserves remain critically low, with no uncommitted funds, limiting its ability to manage future financial pressures. 48. 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. Similar to 2024/25, Midlothian IJB has no uncommitted balances within its general fund reserve. 49. Exhibit 5 illustrates the significant decline in reserves held by Midlothian IJB over the last five years. Reserve balances fell from £10 million at 31 March 2023 to £0.9 million at 31 March 2025. Although reserves increased to £1.8 million during 2025/26, largely due to the additional funding received for unscheduled care, all balances are committed for specific purposes. As a result, Midlothian IJB has no uncommitted reserves available to absorb future financial pressures against future pressures, reducing its flexibility to respond to unforeseen costs or funding challenges. Page 128 of 160
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Wider scope and Best Value audit | 17 Exhibit 5 Midlothian IJB earmarked and uncommitted reserve movements over 5-year period Source: Midlothian IJB published annual accounts 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 50. 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. 51. Midlothian IJB remains highly dependent on its partner bodies to manage financial pressures. Given the absence of uncommitted reserves and continuing budget gaps, maintaining sustainable services will require ongoing collaboration and financial support from both partners alongside delivery of planned transformation activity. 52. The latest Medium Term Financial Strategy, reported to the Board in June 2026, is forecasting a cumulative budget gap of £29.6 million to 2028/29, before any recovery actions or savings measures are applied. The Medium Term Financial Strategy highlights that the existing model of care will become financially unsustainable over the medium term unless significant changes are made. 53. To address this challenge, Midlothian IJB is undertaking an extensive transformation programme to redesign services, improve efficiency and 0 5 10 15 20 25 2021/22 2022/23 2023/24 2024/25 2025/26 Reserves £m Earmarked General Total Page 129 of 160
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Wider scope and Best Value audit | 18 support the long-term sustainability of integrated health and social care services. 54. Delivering the transformation programme will be critical to addressing future funding gaps. Failure to deliver planned service redesign and savings would significantly increase financial sustainability risks. 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 Governance arrangements remain appropriate and support effective scrutiny, challenge and decision making 58. The Board met eight times during 2025/26 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. 59. We consider that governance arrangements remain appropriate and support effective scrutiny, challenge and decision making. Arrangements for the Section 95 Officer role remain temporary 60. The IJB is required to appoint a Section 95 Officer (Chief Finance Officer). This role is fundamental to effective governance, accountability and strategic financial planning. As the statutory financial lead, the CFO is responsible for ensuring that resources are aligned with the IJB's strategic priorities and that financial sustainability is maintained. 61. Given the significant financial pressures facing the health and social care sector, the importance of this role has increased considerably. Page 130 of 160
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Wider scope and Best Value audit | 19 However, Midlothian IJB has been unable to secure a permanent CFO since the departure of the previous permanent postholder. 62. During this period, the role has been delivered through a series of interim and temporary arrangements, with four different postholders carrying out the function during our appointment as external auditor. This has reduced continuity and increased the risk of loss of organisational knowledge at a time when strong financial leadership is critical. Recommendation 3 The IJB should establish and implement a robust workforce and succession plan for the Section 95 Officer (Chief Finance Officer) role to ensure continuity of statutory financial leadership and compliance with legislative requirements. Midlothian IJB approved a refreshed Strategic Plan covering the period 2025-2035 63. The Strategic Plan 2025–2035, approved in October 2025 provides a framework for addressing the significant financial and performance challenges facing the Midlothian IJB. The overall strategy reflects an assessment of future demand and sets out a clear commitment to prevention, service transformation and a shift towards community-based models of care. Transformation and Change Programme 64. The Midlothian IJB Executive Leadership Team has identified a series of transformation workstreams for the period 2025/26–2027/28. These will be overseen by designated Senior Responsible Officers through the Midlothian Transformation and Change Programme Board and are expected to continue to evolve as priorities develop. 65. Key areas of focus include: • shifting the balance of care from specialist and acute services towards community-based health, social care and primary care services. • promoting an asset-based approach that recognises individuals' strengths, skills and capabilities. • investment in prevention, early intervention, self-management, education and community support. • developing more personalised, flexible services that enable people to receive care at home or within their communities whenever possible. Page 131 of 160
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Wider scope and Best Value audit | 20 • supporting choice and control through Self-Directed Support (SDS). • developing a Community Front Door model to improve access to services and support. 66. Midlothian IJB has identified a number of challenges that could affect delivery of the Transformation Programme. These include limited management and operational capacity, competing short-, medium- and long-term priorities, and the need to maintain organisational commitment to change over an extended period. Midlothian IJB also recognises that the benefits of transformation activity may take time to be realised and that expectations regarding outputs and delivery timescales will need to remain realistic. 67. Delivery of the Transformation Programme will be a key determinant of the IJB's future financial sustainability, and we will continue to monitor progress in achieving planned savings, service redesign and intended outcomes. Use of Resources to Improve Outcomes 68. 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. Midlothian IJB published its 2025/26 annual performance report after the statutory deadline 69. Midlothian IJB’s 2025/26 Annual Performance Report was presented and approved by the Board in August 2026. 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. (refer Action Plan). 70. The Annual Performance Report for 2025/26 provides year on year trend analysis data for national core performance indicators. Performance across national indicators remains mixed 71. Performance against the national indicators in 2025/26 presents a mixed picture. Improvements were reported in several key system indicators, including emergency bed day rates, hospital readmissions, delayed discharges, the proportion of adults with intensive care needs supported at home, Care Inspectorate inspection outcomes, and people's experience of GP services. 72. These improvements are consistent with Midlothian IJB's strategic ambition to support people to remain independent and receive care closer to home. Page 132 of 160
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Wider scope and Best Value audit | 21 73. Performance was less positive across a number of experience-based measures. Lower levels of positive feedback were reported among adults receiving support at home, including perceptions of independence, involvement in decisions about care, coordination of services and the impact of support on quality of life. 74. In addition, only 36.4% of carers reported feeling supported to continue in their caring role, indicating that further improvement is required in supporting unpaid carers and enhancing people's experience of care and support services. Clinical and system performance indicators were generally more positive 75. Despite significant financial pressures, performance across a number of clinical and system measures remained relatively strong. For example, 89.0 per cent of people's final six months of life were spent at home or in a community setting, 57.7 per cent of adults with intensive care needs received care at home, and 78.5 per cent of care services achieved Care Inspectorate grades of good or better. 76. While challenges remain, particularly in relation to user and carer experience, Midlothian IJB has continued to deliver positive outcomes in several key areas while progressing its programme of service transformation. Conclusions on Best Value Audit work on the arrangements in place at Midlothian IJB to secure Best Value found these to be appropriate and operating effectively. 77. During 2025/26, Midlothian IJB implemented a Best Value Framework to support the monitoring and assessment of progress across the seven Best Value themes: • Vision and leadership • Governance and accountability • Effective use of resources • Partnership and collaborative working • Working with communities • Sustainability • Fairness and equality 78. Midlothian IJB has reported that progress against these themes is being monitored through the Strategic Governance Outcomes Map and will be reported to the Board by December 2026. We will review progress as part of our 2026/27 audit work. Page 133 of 160
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Appendix 1: Action plan 2025/26 | 22 Appendix 1: Action plan 2025/26 2025/26 recommendations Matter giving rise to recommendation Recommendation Agreed action, officer and timing 1. Public inspection notice Section 195(b) of the Local Government (Scotland) Act 1973 requires the public inspection notice to be displayed in a conspicuous place within the authority's area or published in a newspaper circulating within that area. During our review, we noted that Midlothian IJB published the public inspection notice solely on its website. While this supports public accessibility, it does not fully comply with the requirements of Section 195(b) of the Local Government (Scotland) Act 1973. Management should ensure that future public inspection notices are published in accordance with the requirements of Section 195(b) of the Local Government (Scotland) Act 1973. This should include displaying the notice in one or more conspicuous places within the authority's area or publishing the notice in a newspaper circulating within the area, in addition to any publication on the IJB's website Accepted Agreed action: Midlothian IJB will engage with Midlothian Council to ensure the public inspection notices are published in a more conspicuous place going forward. Responsible officer: Chief Officer Agreed date: June 2027 2. Review of unaudited accounts There were a number of disclosure weaknesses and inconsistencies identified in the unaudited accounts which were not identified through the existing governance and scrutiny arrangements. Management should strengthen the annual accounts preparation and governance review process to ensure that the financial statements are subject to a comprehensive review by members before submission to audit. Accepted Agreed action: Midlothian IJB will review the current process and timelines to review the unaudited accounts through its governance structure to improve the scrutiny next year. Responsible officer: Chief Finance Officer Agreed date: June 2027 3. Changes in CFO The IJB should establish and implement a robust workforce Accepted Page 134 of 160
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Appendix 1: Action plan 2025/26 | 23 Matter giving rise to recommendation Recommendation Agreed action, officer and timing The IJB is required to appoint a Section 95 Officer (Chief Finance Officer). However, Midlothian IJB has been unable to secure a permanent CFO since September 2023. Failure to secure a permanent Section 95 Officer may reduce organisational resilience and continuity of financial leadership, increasing the risk that strategic financial planning, financial governance and statutory responsibilities are not discharged effectively. This risk is heightened in the current financial environment, where strong and stable financial leadership is essential to support the delivery of sustainable services and informed decision making. and succession plan for the Section 95 Officer (Chief Finance Officer) role to ensure continuity of statutory financial leadership and compliance with legislative requirements. Agreed action: An interim Chief Finance Officer is currently in post until March 2027. Work is underway to establish a permanent Chief Finance Officer role within Midlothian IJB. 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 Agreed date: March 2027 Follow-up of prior year recommendations Matter giving rise to recommendation Recommendation Update 4. Management Commentary (2023/24) 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 The management commentary should be reviewed to ensure it provides a clear summary of performance during the year and transparently sets out financial information. Not implemented Revised action: Work will continue to improve the narrative in the Management Commentary to ensure it tells the story of the IJB better. We will continue to ensure alignment with key publications during the year. Responsible officer: Chief Finance Officer Revised date: March 2027 Page 135 of 160
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Appendix 1: Action plan 2025/26 | 24 Matter giving rise to recommendation Recommendation Update gross expenditure which was included in the prior year accounts were excluded this year). 5. 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. Implemented 6. Delay in publication of the Annual Performance Report (2023/24) 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. Not implemented Delays in the publication of national indicators continue to impact on the ability of the Midlothian IJB to meet the deadline of 31 July. A draft Annual Performance Report was published in July this year without the indicators. Revised action: Midlothian will continue to engage with Scottish Government around this issue and will scope possible solutions to meet the deadline going forward. Responsible officer: Chief Officer Revised date: March 2027 7. Governance – Transparency (2023/24) The Members Register of interests should be available from the Midlothian IJB website. Partially Implemented Revised action: Midlothian IJB will continue to review the public register of interest to Page 136 of 160
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Appendix 1: Action plan 2025/26 | 25 Matter giving rise to recommendation Recommendation Update 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. ensure all are available on the public domain. Responsible officer: Chief Officer Revised date: March 2027 8. Changes in Chief Finance Officer (2023/24) 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. Superseded Page 137 of 160
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Appendix 2: National and performance audit reports | 26 Appendix 2: National and performance audit reports Report name Date published Local government budgets 2026/27 June 2026 Transforming the approach to climate change: Lessons from public audit March 2026 Annual Assurance and Risks Report: A review of 2024/25 local government audits in Scotland March 2026 Integration Joint Boards: Finance bulletin 2024/25 February 2026 The Scottish Budget 2026/24: Supplement to the Financial bulletin 2024/25 February 2026 Local Government in Scotland: Financial bulletin 2024/25 January 2026 Administration of Scottish income tax 2024/25 January 2026 Community health and social care: Performance 2025 January 2026 Delayed discharges: A symptom of the challenges facing health and social care January 2026 NHS in Scotland 2025: Finance and performance December 2025 Financial sustainability and taxes November 2025 Local government performance: Spotlight on culture and leisure services October 2025 Improving care experience: Delivering The Promise October 2025 Flooding in communities: Moving towards flood resilience August 2025 Local government budgets 2025/26 May 2025 NHS in Scotland: Spotlight on governance May 2025 Page 138 of 160
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Midlothian Integration Joint Board 2025/26 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 139 of 160
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MIJB – Audit and Risk Committee Thursday 10th September 2026 Item No 5.4 Internal Audit Terms of Reference Midlothian IJB Performance Management Background The legislation which underpins integration is the Public Bodies (Joint Working) (Scotland) Act 2014. The Act places a duty on Health Boards and Local Authorities to enter into arrangements (the Integration Scheme) to delegate functions and appropriate resources, ensuring the effective delivery of health and social care services. Effective performance management is fundamental to the Board's ability to demonstrate delivery of its strategic objectives, provide assurance regarding service performance and outcomes, and fulfil its statutory duties. Under the Public Bodies (Joint Working) (Scotland) Act 2014, Integration Joint Boards are required to publish an Annual Performance Report which assesses performance against the National Health and Wellbeing Outcomes and other statutory reporting requirements. The Annual Performance Report must include information on progress against strategic priorities, performance indicators, finances, localities, inspections and Best Value arrangements. Midlothian Integration Joint Board has developed a Performance Framework 2025-2028 which establishes the framework through which performance is monitored, measured and reported. The framework links the National Health and Wellbeing Outcomes, the Midlothian IJB Strategic Plan 2025-2035, strategic aims, directions, performance indicators and Ministerial Steering Group indicators. It also includes a Strategic Governance Map which describes how governance arrangements, performance reporting and assurance activities support achievement of strategic outcomes. The Performance Framework identifies the data sources, reporting frequencies and measures used to assess progress towards the National Health and Wellbeing Outcomes and strategic aims. Performance information is drawn from a range of national and local sources, including Public Health Scotland data, Health and Care Experience Surveys, Citizens' Panel surveys, workforce information, operational service data and outcome mapping methodologies. The Board receives performance information through a range of governance arrangements, including the Integration Joint Board, Audit and Risk Committee, Strategic Planning Group and supporting governance structures. The Annual Performance Report is the key performance document presented to the Board and provides information on progress against strategic objectives, National Health and Wellbeing Outcomes, national indicators, financial performance, workforce measures, inspection outcomes and transformation programmes. The Board also receives regular reports relating to delivery of strategic priorities, directions and transformation activity. External scrutiny has highlighted the significance of effective performance reporting arrangements. In its 2024/25 Annual Audit Report, Audit Scotland concluded that Midlothian IJB has appropriate arrangements for managing and reporting performance and noted that governance arrangements support effective scrutiny, challenge and informed decision-making. The report highlighted the publication of the Annual Performance Report and noted the Page 141 of 160
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development of the Performance Framework as a key component of future performance management arrangements. Midlothian IJB continues to operate within a challenging environment characterised by increasing demand for services, workforce pressures, transformational change and significant financial constraints. The Board's Medium-Term Financial Strategy identifies substantial future financial pressures and the need for ongoing transformation of services to achieve sustainability. Robust performance management and reporting arrangements are therefore essential to support effective governance, evidence-based decision making, performance improvement and accountability to stakeholders. Scope & Objectives The scope of the audit is to provide assurance that a strategic governance process is in place that has reported performance information in line with best practice and regulatory requirement to the MIJB Board. The audit will cover the following key objectives: Governance and Accountability • Roles, responsibilities and accountability for performance management and reporting are clearly defined and understood across the IJB, Midlothian HSCP, NHS Lothian and Midlothian Council • Governance arrangements support appropriate oversight, scrutiny and challenge of performance through the IJB Board, Audit and Risk Committee and other relevant governance groups • Performance management arrangements align with the Integration Scheme, Strategic Plan, Performance Framework and statutory guidance • The Board receives sufficient assurance regarding the delivery of delegated functions and achievement of strategic outcomes Performance Framework and Measures • A documented Performance Framework is in place and aligned with statutory requirements, the Strategic Plan, National Health and Wellbeing Outcomes, Integration Indicators and Ministerial Steering Group indicators. • Data requirements, systems and technical definitions supporting each indicator are clearly documented to ensure accurate, relevant, timely and complete information is collected. • performance indicators and outcomes are clearly aligned with the MIJB’s strategic objectives, and enable fulfilment of the remits of the MIJB Board and its Committees • Performance indicators are SMART, with measurable expectations and agreed targets where appropriate. Page 142 of 160
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• Where SMART targets are not in place, there is a clear definition of expected performance and outcomes. Data Quality and Performance Reporting • Data sources, ownership, reporting requirements and validation procedures are clearly defined to ensure data accuracy and to identify and resolve errors or outliers. • Appropriate controls are in place to ensure performance information is accurate, complete, timely and reliable. • Reporting to the Board and Committees complies with the Performance Management Framework and agreed reporting frequencies. • Procedures and timetables define responsibilities, validation requirements and reporting deadlines. • Performance reports provide meaningful analysis, trend information, benchmarking and commentary to support informed decision-making. • The Annual Performance Report is prepared in accordance with statutory guidance and reporting requirements. • Performance dashboards and reports support effective scrutiny and challenge by members and officers and are reviewed appropriately prior to submission. Performance Review, Scrutiny and Challenge • Performance information is routinely reviewed by management, Committees and the Board. • Variances, risks and areas of underperformance are identified, reported and escalated appropriately. • Root-cause analysis is undertaken where significant performance issues arise. • Members receive sufficient information to effectively scrutinise and challenge reported performance effectively. • Actions arising from performance concerns are agreed, monitored and followed through to completion. Escalation, Improvement and Risk Management • Performance-related and reporting risks are identified, recorded and managed through appropriate governance and risk management arrangements. • Thresholds and arrangements for escalation of significant performance issues are clearly defined. • Recovery and improvement plans are developed and monitored where performance falls below expected standards. Page 143 of 160
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• Lessons learned and continuous improvement activities are embedded within performance management arrangements. • Performance and reporting risks are subject to regular review and appropriate mitigation. Board Reporting and Development • Performance reporting provides Board members with sufficient contextual information, benchmarking, trend analysis and outcome information to support effective scrutiny and decision-making. • Arrangements are in place to assess Board members' understanding, confidence and development needs in relation to performance management and scrutiny. • Appropriate training, guidance and development opportunities are available to support Board members in fulfilling their governance responsibilities. • Feedback and periodic assessments are used to inform improvements to reporting and member development. Audit Sponsor and key contacts Audit Sponsor: Morag Barrow, Chief Officer Key contacts: Elouise Johnstone, Programme Manager (Performance and Improvement) Resources Principal Auditor – 10 Days Chief Internal Auditor – 2 days Timescales Audit work will commence on xxx. A draft report will be available for management review in xxx. A final report will be agreed at xxx The final report is targeted for submission to the Audit & Risk Committee on xxx These timescales are dependent upon the continued availability of service staff, systems access and documentation relevant to this audit being available in a timely manner when requested. Reporting A detailed internal audit report will be submitted to Management. The Audit & Risk Committee will be issued with a copy of the full report when finalised. A draft report will be issued for discussion to the Midlothian IJB Integration Manager. Once agreed, the final report will be issued to: • Midlothian IJB Chief Officer • Midlothian IJB CFO Page 144 of 160
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• External Audit The distribution list for draft or final reports may be updated in response to any audit findings or changes in scope. Page 145 of 160
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Midlothian IJB Audit and Risk Committee Thursday, 10th September 2026, 14:00-16:00 Resource Panel Spend Deep Dive Executive summary This report provides the Audit and Risk Committee with an overview of recent Resource Panel expenditure growth analysis, the revised 2026/27 challenge position, the concentration of cost pressures, delivery risk attached to identified savings and the longer-term trend scenario. The Committee is asked to consider whether the proposed controls provide sufficient assurance over demand-led expenditure, provider costs, savings delivery and forecast quality. Resource Panel expenditure was £59.6m in 2025/26, increasing by £5.5m (10.2%) in the year. The revised savings-adjusted 2026/27 outlook is £64.4m, £4.8m above 2025/26. This assumes full delivery of £1.522m savings. The trend scenario reaches £91.6m by 2030/31, with the principal financial risk concentrated in Learning Disabilities and Older People. Committee Members are asked to: • note the revised central challenge position of £64.407m; • recommend monthly assurance over the full £1.522m savings plan through operational governance structures; • support the ongoing work to provide activity-led validation of priority care lines; • support the work to separate funded and unfunded growth; • request the five-year scenario is updated when assumptions change; and • request exception reporting on material variance, control weakness or savings under- delivery. Item number: 5.5 Page 147 of 160
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Midlothian Integration Joint Board Audit & Risk Committee Report Resource Panel Spend Deep Dive 1 Purpose 1.1 This report provides the Audit and Risk Committee with an overview of recent Resource Panel expenditure growth, the revised 2026/27 challenge position, the concentration of cost pressures, delivery risk attached to identified savings and the longer-term trend scenario. The Committee is asked to consider whether the proposed controls provide sufficient assurance over demand-led expenditure, provider costs, savings delivery and forecast quality. 2 Recommendations 2.1 As a result of this report, Committee Members are asked to: • note the revised central challenge position of £64.407m; • recommend monthly assurance over the full £1.522m savings plan through operational governance structures; • support the ongoing work to provide activity-led validation of priority care lines; • support the work to separate funded and unfunded growth; • request the five-year scenario is updated when assumptions change; and • request exception reporting on material variance, control weakness or savings under- delivery. 3 Background and main report 3.1 Expenditure increased from £40.8m in 2022/23 to £59.6m in 2025/26, a cumulative rise of 46.1%. Learning Disabilities accounted for 50.3% of the latest net movement and Older People for 31.9%. The top five positive expenditure lines generated 70.6% of the increase, supporting targeted assurance. 3.2 The gross 2026/27 trend projection is £65.9m. After £1.522m identified savings, the revised net projection is £64.4m, growth of 8.1%. Addictions is normalised to 4.3% using the two preceding annual movements, excluding the unusual 2025/26 increase. The outlook will be refreshed monthly for actual run-rate, investment and savings delivery. 3.3 Learning Disabilities is projected at £30.5m, an increase of £2.8m, while Older People is projected at £25.5m, an increase of £1.4m. The largest cost-line increases are Older People Nursing Home Care and Learning Disabilities Day Care, each approximately £1.1m, followed by LD Residential Home Care, Care at Home and Housing Support. Validation should reconcile these lines to activity, acuity, rates, capacity and service redesign. 3.4 The revised outlook includes five savings initiatives totalling £1.522m. Older People Care at Home initiatives total £905k and Learning Disabilities initiatives total £617k. The model assumes full-year delivery with no phasing or slippage. Savings delivery is Page 148 of 160
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Midlothian Integration Joint Board Audit & Risk Committee monitored via Operational Governance meetings with the Partnership Executive Management Team. 3.5 The trend scenario increases from £64.4m in 2026/27 to £91.6m in 2030/31—an increase of £27.1m (42.1%). Learning Disabilities contributes £17.6m and Older People £6.4m. No further savings, inflation assumptions, investment, demographic change or redesign are added after 2026/27, so this is a planning stress indicator rather than an approved budget forecast. 3.6 The principal risks are demand and complexity exceeding assumptions; provider fee and workforce pressures; delayed or unsustained savings; funded investment being obscured within gross expenditure growth; and trend-based forecasts not reflecting changing activity or service models. Controls should include monthly run-rate review, activity-led forecasting, funded/unfunded reconciliation, contract and rate validation, named savings ownership, milestone evidence and exception reporting against agreed tolerances identified. 3.7 The analysis indicates a sustained and concentrated expenditure challenge. The immediate assurance priority is whether the major demand-led cost lines and the savings plan are supported by robust operational evidence, accountable ownership and timely corrective action. A disciplined monthly control cycle, with committee exception reporting, will distinguish funded investment, unavoidable demand pressure and controllable variance. 4 Policy Implications 4.1 This report does not have any direct impact on policy. 5 Directions 5.1 The content of this report does not have any direct impact on existing Directions. 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 Regular review of the Risk Register helps reduce the risk that emerging strategic, operational or compliance risks are not identified, escalated or mitigated in a timely way. 9 Involving people Page 149 of 160
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Midlothian Integration Joint Board Audit & Risk Committee 9.1 This report has been prepared following consultation with NHS Lothian and Midlothian Council finance partners, officers of Midlothian IJB and the Midlothian HSCP executive management team. 10 Background Papers 10.1 There are no background papers. AUTHOR’S NAME & DESIGNATION Eleonora Ho – Chief Finance Officer CONTACT INFO Eleonora.Ho@nhs.scot DATE 26/08/2026 Appendices: Appendix 1: Resource Panel Spend Deep Dive Slide Deck Page 150 of 160
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AUDIT & RISK COMMITTEE | FINANCIAL ASSURANCE BRIEF Resource Panel expenditure Outlook, dependencies and committee assurance The £64.4m outlook reflects sustained demand pressure and assumes full delivery of £1.522m savings. COMMITTEE IS ASKED TO 01 NOTE the revised 2026/27 outlook and concentration of pressure 02 CHALLENGE savings delivery, demand assumptions and forecast quality 03 ENDORSE monthly assurance and exception reporting Prepared from the figures and assumptions in the draft presentation 01Page 151 of 160
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01 TRAJECTORY £59.6m outturn confirms sustained expenditure growth Four-year growth is 46.1%; the latest year added £5.5m. £59.6m 2025/26 outturn +£5.5m year-on-year increase 10.2% annual growth 46.1% growth since 2022/23 £35m £40m £45m £50m £55m £60m £65m 2022/23 2023/24 2024/25 2025/26 COMMITTEE LENS Growth is not a one-year variance. Learning Disabilities and Older People account for most of the latest increase. Assurance should therefore connect forecast movements to activity, complexity and unit cost. 02 Page 152 of 160
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59.6 6.4 -1.5 64.5 2025/26 Actual Gross Trend Pressure Savings Revised Net Costs 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 Increase Decrease Total 02 2026/27 OUTLOOK The £64.4m outlook depends on the full savings assumption Gross pressure adds £6.4m; £1.522m of savings is required to reach the revised position. OUTLOOK BUILD £59.6m 2025/26 actual + £6.4m gross pressure − £1.522m savings = £64.4m revised outlook CENTRAL OUTLOOK BUILD ASSURANCE IMPLICATION The central outlook is a controlled position—not a passive forecast. Report gross pressure, savings delivered, savings forecast and the resulting net position separately each month. KEY DEPENDENCY 100% of the £1.522m savings plan is assumed in the £64.4m outlook. 03 Page 153 of 160
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03 SERVICE CONCENTRATION 85% of the movement sits in two service areas £0m £5m £10m £15m £20m £25m £30m £35m Older People Learning Disabilities Physical Disabilities Mental Health Non-Specific Groups Addictions HIV / Aids PRIORITY ASSURANCE £30.5m Learning Disabilities +£2.8m | +9.9% £25.5m Older People +£1.4m | +5.8% Work is ongoing to link activity and complexity data with financial information to support better forecasting 04 Page 154 of 160
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04 COST DRIVERS Five care cost lines explain 73% of the net movement The largest two increases are each approximately £1.1m. £0.0m £0.3m £0.5m £0.8m £1.0m £1.3m OP Nursing Home Care LD Day Care LD Residential Home Care LD Care at Home OP Residential Home Care COMMITTEE LENS £3.5m combined increase across the five lines Required evidence For each priority line: activity volume, average unit cost, placement mix and variance to plan. This turns cost-line movement into a testable operational explanation. 05 Page 155 of 160
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05 SAVINGS DEPENDENCY £1.042m is shown in the Q1 forecast against a £1.522m plan The outlook assumes full delivery; evidence of timing, milestones and recovery action is therefore critical. Q1 FORECAST COVERAGE 68% £1.042m of £1.522m plan Initiative Plan £k Q1 forecast £k Gap £k Travel time reduction 305 305 — Reablement 600 400 200 Sleepovers / waking nights 300 133 167 Additional care (2:1) 203 90 113 CAT and Garvald 114 114 114 06 Page 156 of 160
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06 MEDIUM-TERM EXPOSURE The trend scenario reaches £91.6m by 2030/31 That is a £27.1m increase from 2026/27, with Learning Disabilities contributing £17.6m. £60m £65m £70m £75m £80m £85m £90m £95m 2026/27 2027/28 2028/29 2029/30 2030/31 SCENARIO MOVEMENT +£27.1m 42.1% increase over four years +£17.6m Learning Disabilities +£6.4m Older People Refresh the scenario whenever budgets, demand or savings assumptions change; report the movement and cause. 07 Page 157 of 160
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07 RISK AND CONTROL Controls are defined; committee assurance needs evidence of operation The core question is whether each control is current, evidenced and triggering timely action. Principal risk Management control Evidence for committee assurance Demand / complexity Monthly activity-led forecast and variance analysis Demand andcomplexity data Provider price / workforce Contract management Contract reviews Savings under-delivery Owners, milestones, monthly profiles and recovery plans RAG, benefit evidence and recovery action at operational governance meetings Forecast quality Actual-to-forecast review and documented assumptions Bias trend and assumptions recorded Funding visibility Separate funded investment from unfunded pressure Reconciled funded / unfunded bridge 08 Page 158 of 160
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08 COMMITTEE ACTIONS Approve the assurance rhythm and escalation triggers TODAY 01 Note the revised £64.4m central challenge position. TODAY 02 Support the work around activity-led validation of the priority care cost lines. MONTHLY 03 Require assurance over the full £1.522m savings plan via Operational governance routes. YEARLY 04 Require funded and unfunded growth to be reported separately. ON CHANGE 05 Refresh the five-year scenario when budgets or assumptions change. BY EXCEPTION 06 Receive reports on material variance, control weakness or savings slippage. Decision sought Endorse the cadence, evidence requirements and exception triggers. 09 Page 159 of 160
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