Agenda Document Pack - Midlothian Integration Joint Board - Audit and Risk Committee - 05/06/2025
Midlothian Council · 5 June 2025
Back to Midlothian Integration Joint Board - Audit and Risk Committee — 5 June 2025 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
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Notice of Meeting and Agenda Midlothian Integration Joint Board - Audit and Risk Committee Venue: Virtual Meeting, Date: Thursday, 05 June 2025 Time: 14:00 Morag Barrow Chief Officer 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 120
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1 Welcome, Introductions and Apologies 2 Order of Business Including notice of new business submitted as urgent for consideration at the end of the meeting. 3 Declaration of Interest 3 Members should declare any financial and non-financial interests they have in the items of business for consideration, identifying the relevant agenda item and the nature of their interest. 4 Minute of Previous Meeting 4.1 Minute of the Audit and Risk Committee minutes - 6 March 2025 submitted for approval - Chair 5 - 14 5 Public Reports 5.1 Chairs Update (Verbal) – Val de Souza, Chair 5.2 IJB Complaints (Verbal) – Gill Main, Integration Manager 5.3 Risk Register Update 2025/26 Presented by Chris King, Chief Finance Officer 15 - 26 5.4 Reserve Policy Review Presented by Chris King, Chief Finance Officer 27 - 42 5.5 Annual Governance Statement Presented by Duncan Stainbank, Chief Internal Auditor 43 - 50 5.6 Draft Unaudited Financial Accounts (2024/25) Presented by Chris King, Chief Finance Officer 51 - 90 5.7 Annual Internal Audit Opinion Presented by Duncan Stainbank, Chief Internal Auditor 91 - 102 5.8 NHS Lothian Internal Audit on Data Integrity Presented by Duncan Stainbank, Chief Internal Auditor 103 - 120 5.9 IJB Audit Bulletin Presentation Presented by Audit Scotland 6 Private Reports No items for discussion Page 2 of 120
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7 Date of Next Meeting The next meeting will be held on Thursday 4th September 2025, 14:00 - 16:00, Microsoft Teams (online). Page 3 of 120
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MIJB - Audit and Risk Committee MIJB – Audit and Risk Committee Thursday 5 June 2025 Item No 4.1 Meeting Date Time Venue Audit and Risk Committee Thursday, 6 March 2025 2.00pm Virtual Meeting held using MS Teams Present (IJB voting members): Val De Souza (Vice Chair) (NHS) Kirsty Macdonald (NHS Lothian) Councillor Milligan (Midlothian Council) Present (IJB non-voting members): Morag Barrow (Chief Officer) Chris King (Interim Chief Finance Officer) Present (Officers): Gill Main (Integration Manager) Duncan Stainbank (Chief Internal Auditor) Patricia Fraser (External Auditor) Roxanne King (Executive Business Manager) Antony Clark (Independent Member) In attendance: Hannah Forbes (Democratic Services Officer) Apologies: Claire Gardiner (External Auditor) Page 5 of 120
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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. The Chair formally welcomed Antony Clark as the Independent Member and introduced the new Interim Chief Finance Officer Chris King to the meeting. The Chair also thanked Councillor Milligan for Chairing the last meeting. Apologies were noted from Claire Gardiner, Audit Scotland. 2. Order of Business The Order of Business was as detailed in the agenda. 3. Declarations of Interest No declarations of interest were received. 4. Minute of Previous Meetings 4.1 The Minute of the Audit and Risk Committee meeting held on 5 December 2024 was submitted and approved, subject to the following amendment - Kirsty Macdonald’s membership status to be corrected from non-voting member to voting member. 4.2 The Chair noted the absence of a designated "Matters Arising" section on the Audit and Risk Committee agenda and used this opportunity to raise several points from the previous meeting Page 6 of 120
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MIJB - Audit and Risk Committee • Vice Chair Appointment: There was a discussion at the last meeting regarding the potential appointment of a Vice Chair, with Councillor Parry suggested for the role. Councillor Milligan confirmed they would follow up with Councillor Parry prior to the next meeting. • Datix Presentation: The Chair recalled an aspiration for a Datix presentation to be included on the March agenda, which had not been actioned. The Interim Chief Finance Officer agreed to schedule this for the June meeting. • Internal Audit Actions: The Chair requested an updated report on outstanding actions from Internal Audit be brought to the June meeting. 5. Public Reports Report Title/Summary Decision Action Owner Date to be Completed/ Comments 5.1 Chairs Update (Verbal) – Val de Souza, Chair The Chair provided an update to the Audit and Risk Committee and noted that the Committee is currently undergoing a period of transition. The Chair welcomed the new Interim Chief Finance Officer, Chris King, and the newly appointed Independent Member, Antony Clark, emphasising the value that an Independent Member brings in offering objective challenge and support. Appreciation was expressed for the dedication and engagement shown by staff across the Health and Social Care Partnership in progressing financial recovery efforts. The Chair noted that at the recent IJB meeting, there was a positive update on the proposed budget offer from Midlothian Council. The chair acknowledged while the proposed allocation Page 7 of 120
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MIJB - Audit and Risk Committee Report Title/Summary Decision Action Owner Date to be Completed/ Comments does not fully resolve the financial pressures facing the IJB, it demonstrates a strong commitment from Midlothian Council to supporting the IJB The Chair highlighted the recent publication from the Accounts Commission regarding the financial position of IJBs across Scotland. The report stresses the need for transformation and improved collaboration between partners and IJBs to ensure future sustainability. The Chief Officer advised that the formal report had been published earlier that day and would be circulated to Committee Members. The Committee requested that the Accounts Commission report be brought back for a more detailed discussion at the next Audit and Risk Committee meeting, with a focus on its implications in the Midlothian context. Agreed – Request Audit Scotland present at the next meeting. Chief Finance Officer June 2025 5.2 Risk Register – Interim Chief Finance Officer The Interim Chief Finance Officer provided an overview of the extract from the Risk Register paper originally presented by David King, former Chief Finance Officer, in December 2024. It was noted that the Risk Register is presented for noting at this meeting, with an acknowledgment that a full review is required following the budget setting meeting held on the 27th of March 2025. Page 8 of 120
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MIJB - Audit and Risk Committee Report Title/Summary Decision Action Owner Date to be Completed/ Comments The Interim Chief Finance Officer proposed that an updated Risk Register and revised Risk Policy be brought forward as a combined package to the June 2025 Audit and Risk Committee meeting. The Chair thanked the Interim Chief Finance Officer for the report and confirmed agreement with the recommendation to return with the updated documents in June 2025. Agreed Chief Finance Officer June 2025 5.3 Internal Audit Plan 2025/26 - Duncan Stainbank, Chief Internal Auditor The Chief Internal Auditor presented the proposed 2025/26 Internal Audit Annual Plan for Midlothian IJB. As a result of this report, Members are asked to: • Approve the Internal Audit Annual Plan 2025/26 for the Midlothian Integration Joint Board. The Chair thanked the Chief Internal Auditor for the report and opened for questions. The Integration Manager sought clarification on item 3, Performance Management, in the appendix, asking whether this referred to performance reporting rather than governance. The Chief Internal Auditor confirmed that it pertains to performance reporting The Chair asked the Chief Officer if they were content with the plan and if there was sufficient capacity to support its delivery. The Chief Officer confirmed they were satisfied with the plan and had been involved in its initial development. They acknowledged that capacity can be a challenge due to the size of the Health Page 9 of 120
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MIJB - Audit and Risk Committee Report Title/Summary Decision Action Owner Date to be Completed/ Comments and Social Care Partnership (HSCP) management team and audit provision but assured that any issues would be flagged to the Audit and Risk Committee if they arise. The plan was agreed and for noting at the Midlothian IJB on 24th April 2025. Agreed – submitted to IJB for noting. Chief Internal Auditor April 2025 5.4 External Audit Plan - Audit Scotland Audit Scotland presented the 2024/25 Annual Audit Plan, outlining the planned scope and timing of the audit for Midlothian IJB’s annual accounts. The plan includes details of the audit work to be undertaken in accordance with auditing standards, the Code of Audit Practice, and associated supplementary guidance. The Chair thanked Patricia Fraser for the report and opened to any comments or questions. The Interim Chief Finance Officer confirmed agreement with the materiality levels set out in the plan. While acknowledging the tight timetable for submission of the first draft accounts, it was stated this is manageable and consistent with previous years’ timelines. The Chief Officer noted the proposed 2% increase in audit fees and requested further detail on the fee setting process. Audit Scotland responded that they are mindful of the financial pressures facing organisations and reassured Members that efforts are being made to reduce their internal costs. Recent cost reductions have contributed to the comparatively lower increase in fees this year. Agreed – Draft Annual Accounts to be submitted to the next meeting. Chief Finance Officer June 2025 Page 10 of 120
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MIJB - Audit and Risk Committee Report Title/Summary Decision Action Owner Date to be Completed/ Comments In response to a question from the Committee, Audit Scotland confirmed they formally request assurance from the auditors of both the Health Board and the Council annually, in line with standard accounting practices. The Integration Manager emphasised the importance of early planning and alignment between the Chief Finance Officer and Audit Scotland to ensure timelines are met. It was reiterated that meeting statutory duties, including those outlined in the Scheme of Publication as well as financial responsibilities, is essential for maintaining the Board’s integrity and compliance. 5.5 Amendment to Strategic Planning Group Terms of Reference - Gill Main, Integration Manager The Integration Manager stated that this report is presented for consideration and proposes an amended Terms of Reference for the Midlothian IJB Strategic Planning Group (SPG). As a result of this report, Members are asked to: • Review the revised Midlothian IJB Strategic Planning Group (SPG) Terms of Reference (ToR). • Note the proposed change and implications for membership and Standing Orders. • Consider approval of these Terms of Reference (ToRs) and instruct the Standards Officer to review the Standing Orders accordingly. A question was raised by the Committee asking for more information as to why it has been so difficult to recruit a voting member. Agreed Page 11 of 120
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MIJB - Audit and Risk Committee Report Title/Summary Decision Action Owner Date to be Completed/ Comments The Integration Manager explained that a range of complex factors are likely contributing to this challenge. The Chief Officer agreed with this assessment and suggested there may be potential in approaching the current Third Sector Representative to take on the role of Vice Chair. The Chair proposed a discussion on what enhanced Third Sector involvement might look like, including the possibility of arranging a development session later in the year. The Integration Manager noted that the Third Sector were scheduled to lead and IJB Development Session on 8th May 2025. 5.6 Internal Audit Report: Financial Recovery Action Reporting - Duncan Stainbank, Chief Internal Auditor The Chief Internal Auditor presented the report. The purpose of this report to detail the findings and recommendations from the recently completed Internal Audit review of Midlothian IJB Recovery Plan Reporting, completed under supervision from the Midlothian Council Chief Internal Auditor by the NHS Lothian Internal Audit team. As a result of this report, Members are asked to: • To consider the findings and recommendations from the recently completed Internal Audit review of Midlothian IJB Recovery Plan Reporting. The Chair thanked the Chief Internal Auditor for the report and opened for questioning. The Interim Chief Finance Officer emphasised the importance of accurate and timely reporting on financial recovery actions. It was noted that these actions are included within the Quarter 3 Agreed Page 12 of 120
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MIJB - Audit and Risk Committee Report Title/Summary Decision Action Owner Date to be Completed/ Comments financial paper, and this approach will continue as a core element of finance reporting going forward. The Audit and Risk Committee agreed to the findings and recommendations from the recently completed Internal Audit Review of Midlothian IJB Recovery Plan Reporting. 5.7 NHS Lothian Audit and Risk Committee Management - Duncan Stainbank, Chief Internal Auditor The Chief Internal Auditor presented the report. The purpose of this report is to Inform the Midlothian IJB Audit and Risk Committee of the NHS Lothian Internal Audit Report on Risk Management providing Moderate Assurance. As a result of this report, Members are asked to: • Note the findings of the NHS Lothian Internal Audit on Risk Management. The Chair thanked the Chief Internal Auditor for the report and opened for questions and comments. The Chair queried whether such reports are reviewed by Non Executive Directors before being submitted to the Audit and Risk Committee. The Chief Internal Auditor confirmed that the report had been presented to the NHS Lothian Audit and Risk Committee in November, and following discussion at that Committee, the reports are made publicly available via the NHS Lothian website. The Chair acknowledged the report’s insightful and impactful content and noted the importance of considering such reports carefully in the future. Page 13 of 120
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MIJB - Audit and Risk Committee 6. Private Reports No items for discussion. 7. Any Other Business The Chair invited Members to raise any additional items for noting or discussion. The Interim Chief Finance Officer acknowledged their recent appointment and shared aspirations for the Audit and Risk Committee meetings to evolve into a more impactful and meaningful forum, with a stronger focus on addressing the key risks facing the IJB. The Chief Officer reflected on the Committee’s future direction, noting that the recent additions of the Interim Chief Finance Officer and Independent Member present an opportunity to review how the Committee operates. It was proposed that a dedicated 1 hour session be scheduled during 2025 to consider potential improvements to the Committee’s structure and function. The Chair supported this proposal, highlighting it as a valuable opportunity for collective reflection and discussion. The Chair extended thanks to Kirsty Macdonald for her significant contributions over the past year and acknowledged that this meeting would be her last attendance as a Committee Member. The Chief Internal Auditor also requested permission from Kirsty Macdonald to distribute questionnaires in advance of her departure to support the review. The Chair noted that the Chief Officer and Councillor McManus meet regularly and confirmed that the key points raised at today’s meeting will be included in their discussions. Other officers may be invited to attend as appropriate. . 8. Date of Next Meeting The meeting terminated at 15:08pm. The next meeting will be held on Thursday 5th June 2025 at 14:00-16:00 via MS Teams Page 14 of 120
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Midlothian IJB Audit and Risk Committee Thursday, 5th June 2025, 14:00-16:00 Midlothian IJB Risk Register 2025/26 Executive summary This report presents the Integration Joint Board’s (IJB) Risk Register for review and updating at end Q1 2025/26. The IJB maintains an active Risk Register, which is reviewed quarterly by senior management and presented at every meeting of this committee to ensure robust oversight of key strategic and operational risks. Following the IJB Board meeting on 24th April 2025, it was agreed that a comprehensive review of the Risk Register was both timely and necessary, in light of the evolving and increasingly challenging financial landscape. Particular attention has been given to identifying and capturing any emerging risks linked to national decisions and the IJB’s statutory duty to set a balanced budget for 2025/26. The review has now been concluded with the key adjustments being made: • Risk Removal: Risk ID 5771 – Partners’ operational resources may be inadequate or unable to deliver the IJB’s Strategic Plan. • Risk Addition: Sustainability of External Providers. • Risk Addition: Financial Reporting and Oversight Committee Members are asked to: • Consider whether any further risks should be added, or existing entries amended. • Review, and subject to any required amendments, agree the updated Risk Register at end Q1 2025/26. Item number: 5.3 MIJB – Audit & Risk Committee Thursday 5 June 2025 Item No 5.3 Page 15 of 120
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Midlothian Integration Joint Board Report Midlothian IJB Risk Register 2025/26 1 Purpose 1.1 The purpose of this paper is to present the updated Midlothian Integration Joint Board (IJB) Risk Register for review and updating at end Q1 2025/26. 2 Recommendations 2.1 As a result of this report, Committee Members are asked to: • Consider whether any further risks should be added, or existing entries amended. • Review, and subject to any required amendments, agree the updated Risk Register at end Q1 2025/26. 3 Background and main report Background 3.1 Midlothian IJB maintains a Strategic Risk Register in line with best practice for governance and assurance. This register identifies and assesses key risks that may impact the effective operation of the IJB specifically, those that could hinder the development of the Strategic Plan or the successful delivery of that plan through directions issued to its delivery partners. 3.2 The last formal update to the Risk Register was presented in December 2024. At the 6th March 2025 Audit and Risk Committee meeting members discussed the need for a comprehensive review of the register, given the rapidly evolving operating environment. It was agreed that a revised version should be brought forward to the Audit and Risk meeting in June 2025. This was subsequently incorporated into the Chief Finance Officer’s report to the Board in April 2025. 3.3 In response, a detailed review has been undertaken in collaboration with the Executive Management Team. This process involved reassessing the relevance and severity of existing risks and considering whether any new or emerging risks should be incorporated into the Risk Register for 2025/26. 3.4 Key updates to the Risk Register include: • Risk Removal: Risk ID 5771 – Partners’ operational resources may be inadequate or unable to deliver the IJB’s Strategic Plan. This risk is proposed for removal and consolidation into Risk ID 5774, which covers the same underlying issue. Merging these entries will provide a more comprehensive and streamlined overview, while avoiding duplication within the risk register. Page 16 of 120
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Midlothian Integration Joint Board • Risk Addition: Sustainability of External Providers. It is proposed that a new strategic risk be added to reflect increasing cost pressures on external providers, exacerbated by inflationary factors. This is supported by direct feedback from providers regarding the impact on service delivery. This provides a strategic risk as it may impact the IJB’s ability to fully deliver its Strategic Plan due to provider instability. It also poses an operational risk, as providers may be unable to maintain existing levels of care, this operational risk will be captured separately on the Health and Social Care Partnership (HSCP) operational risk register. • Risk Addition: Financial Reporting and Oversight A new risk is proposed following significant financial overspends in both 2023/24 and 2024/25. A key concern is the inherent lag in financial reporting, which impairs the IJB’s ability to make timely decisions required for the IJB to deliver its responsibility of operating within its available resources. This risk reflects the growing challenge of maintaining financial sustainability and the importance of robust, real-time financial oversight 3.5 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 There is a risk that not maintaining a regularly reviewed Risk Register could lead to the Midlothian IJB being unable to take the appropriate action to treat or tolerate emerging risks. 8.2 The Midlothian IJB risks are described at end Q1 2025/26 are detailed in the Midlothian IJB Risk Register (Appendix one). Page 17 of 120
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Midlothian Integration Joint Board 9 Involving people 9.1 This report has been written following consultation with our NHS Lothian and Midlothian Council financial Partners, officers of Midlothian IJB, and with the Midlothian HSCP executive management team. 10 Background Papers 10.1 There are no background papers. AUTHOR’S NAME & DESIGNATION Chris King, Chief Finance Officer CONTACT INFO Chris.King@nhs.scot DATE 19/05/2025 Appendices: Appendix 1: Midlothian IJB Risk Register Page 18 of 120
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Midlothian IJB Risk Register Risk Description ID 5772 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. • Financial allocations are included within directions on an annual basis after IJB budgets have been set • The Planning, Performance and Programme team continue to support with additional capacity to redesign and transform key areas of service delivery • A project management approach continues to support key areas aiming to accelerate progress in the delivery of the MIJB Directions. Adequacy of Controls Some weaknesses: Improvement can be demonstrated however not at optimal level. Risk Assessment Consequence (Current) Moderate (3) Likelihood (Current) Unlikely (2) Rating (Current) 6 Risk Level (Current) Medium Risk Level (Target) Medium Page 19 of 120
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Midlothian IJB Risk Register Risk Description ID 5773 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. • Annual Category 1 Responder assurance report submitted to IJB via Audit & Risk committee • Robust operational process within Midlothian Health and Social Care to meet requirements • Lessons learnt from COVID pandemic 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 Consequence (Current) Moderate (3) Likelihood (Current) Rare (1) Rating (Current) 3 Risk Level (Current) Low Risk Level (Target) Low Page 20 of 120
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Midlothian IJB Risk Register Risk Description ID 5774 Title The IJB is not able to properly deliver its Strategic Plan due to insufficient financial 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 Consequence (Current) Extreme (5) Likelihood (Current) Almost Certain (5) Rating (Current) 25 Risk Level (Current) Very High Risk Level (Target) Medium Page 21 of 120
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Midlothian IJB Risk Register Risk Description ID 5775 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 and the Health and Care (Staffing) (Scotland) Act 2019. 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. 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 Consequence (Current) Major (4) Likelihood (Current) Possible (3) Rating (Current) 12 Risk Level (Current) High Risk Level (Target) Medium Page 22 of 120
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Midlothian IJB Risk Register Risk Description ID 5934 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 directive(s) to the NHSs and/or Local Authorities on functions that are delegated and therefore impact on the IJB. 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. • 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. • Early engagement with Scottish Government policy leads to understand and influence national directives impacting delegated functions. • Strategic Planning Group involvement in reviewing potential implications of partner or government decisions on IJB priorities. Adequacy of Controls Some weaknesses: Improvement can be demonstrated however not at optimal level. Risk Assessment Consequence (Current) Moderate (3) Likelihood (Current) Possible (3) Rating (Current) 9 Risk Level (Current) Medium Risk Level (Target) Medium Page 23 of 120
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Midlothian IJB Risk Register Risk Description ID NEW - TBC 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 Risk Assessment Consequence (Current) Major (4) Likelihood (Current) Possible (3) Rating (Current) 12 Risk Level (Current) High Risk Level (Target) Medium Page 24 of 120
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Midlothian IJB Risk Register Risk Description ID NEW - TBC 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 of 3 months. 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 Risk Assessment Consequence (Current) Moderate (3) Likelihood (Current) Possible (3) Rating (Current) 9 Risk Level (Current) Medium Risk Level (Target) Medium Page 25 of 120
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Midlothian IJB Audit and Risk Committee Thursday, 5th June 2025, 14:00-16:00 Midlothian IJB Reserve Policy 2025/26 Executive summary This report presents the background to and the output from the review of the Integration Joint Board’s (IJB) Reserve Policy. The Midlothian Integration Joint Board (IJB) Reserve Policy, originally approved in 2017, provides a framework for the purpose, use, and governance of reserves to support sound financial management and sustainability. Reserves play a vital role in enabling the IJB to manage the financial position and respond to unforeseen pressures. The current policy sets a target of 2% of the annual revenue budget as a prudent level of general reserves. However, the IJB holds no general reserves, having utilised all available balances to balance its 2023/24 financial position. The inability to rebuild reserves has created significant financial risk heading into 2024/25 and beyond, particularly against the backdrop of rising service demand, workforce challenges, and inflationary pressures. With the IJB unable to balance its in-year 2024/25 financial position, partner bodies are required, as per the integration scheme, to provide additional funding support which is unsustainable in the longer term. In response to these risks and following recommendations from Audit Scotland, a review of the Reserve Policy was undertaken and endorsed by the IJB in April 2025. The review concluded that while the policy remains robust in terms of governance and reserve purpose, the 2% target should be seen as an optimum level to be built over time. Recognising the current financial challenges, a stepped approach to rebuilding reserves over the next 3–5 years is proposed. This approach will be embedded within the revised Medium Term Financial Strategy ensuring alignment between strategic planning and financial resilience. Committee Members are asked to: • Note the findings and output of the reserves policy review undertaken by the Chief Finance Officer. • Approve the amendment to the current reserves policy to ensure alignment with the Integration Scheme. Approve the proposed stepped approach to rebuilding general reserves through the Medium-Term Financial Strategy Item number: 5.4 MIJB – Audit & Risk Committee Thursday 5 June 2025 Item No 5.4 Page 27 of 120
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Midlothian Integration Joint Board Report Midlothian IJB Reserve Policy 2025/26 1 Purpose 1.1 The purpose of this paper is to present the update following the review of the Midlothian Integration Joint Board (IJB) Reserve Policy. 2 Recommendations 2.1 As a result of this report, Committee Members are asked to: • Note the findings and output of the reserves policy review undertaken by the Chief Finance Officer. • Approve the amendment to the current reserves policy to ensure alignment with the Integration Scheme. • Approve the proposed stepped approach to rebuilding general reserves through the Medium-Term Financial Strategy. 3 Background and main report 3.1 The Midlothian Integration Joint Board (IJB) approved a Reserve Policy in 2017 to support sound financial management, promote sustainability, and ensure the IJB is equipped to respond effectively to financial pressures. The current policy is provided in Appendix One. 3.2 Reserves are a core element of financial governance and are typically held for the following purposes: • To create a working balance that helps cushion the impact of uneven cash flows and avoid unnecessary temporary borrowing – forming part of general reserves; • To establish a contingency fund for unexpected events or emergencies – also forming part of general reserves; • To accumulate earmarked reserves to meet known or predicted liabilities. 3.3 The current policy sets a target level of 2% of the IJB’s annual revenue budget as a prudent level of contingency, with the aim of mitigating financial risk and supporting long-term resilience. 3.4 The IJB holds no general reserves, having been required to utilise the full balance of available reserves in 2023/24 to balance the year’s financial position. This introduced significant financial risk entering the 2024/25 financial year, against a backdrop of rising demand, workforce challenges, and ongoing inflationary pressures. 3.5 For 2024/25, the IJB has been unable to balance the in-year financial position. In line with the Integration Scheme, overspends are required to be supported by respective partners. This has placed considerable pressure on partner Page 28 of 120
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Midlothian Integration Joint Board organisations to identify additional funding and highlights the unsustainable nature of the current approach for both the IJB and its partners. 3.6 Since the Reserve Policy was last reviewed, the financial landscape has evolved substantially. Following Audit Scotland’s recommendation and formal approval by the IJB at its April 2025 meeting, a review of the Reserve Policy was undertaken by the Chief Finance Officer through the Midlothian IJB Audit and Risk Committee. 3.7 The review, conducted in collaboration with officers and audit colleagues, concluded that the current policy provides a robust framework in terms of defining the purpose, use, and governance of reserves. 3.8 Currently the only proposed amendment is to more closely align the Reserves Policy with the provisions of the Integration Scheme, specifically item 9.9.3. This relates to the requirement that the accumulation of reserves by the IJB must be directly linked to directions issued by the IJB. This principle is now explicitly reflected in Section 4, "Generation of Reserves", of the Reserves Policy, as detailed in Appendix Two. 3.9 Particular focus was given to the appropriate level of reserves, with the consensus being that a 2% target should remain the optimum level. It was acknowledged, however, that this level may not be immediately achievable due to current financial challenges. 3.10 The importance of reserves in public sector financial planning is strongly supported by the Chartered Institute of Public Finance and Accountancy (CIPFA). Key points from CIPFA’s statement on reserves include: • Reserves are a vital component of prudent financial management and support a public body's ability to meet balanced budget requirements. • Reserves should be accumulated over time and play a central role in medium-term financial planning. • Reserves are essential to enabling public bodies to manage the progressive reduction in public expenditure expected in the coming years. 3.11 It is important to acknowledge the increasing difficulty of achieving and maintaining the 2% reserve target. Year on year budget balancing has required a sustained focus on financial recovery. In this context, opportunities to generate and retain surplus balances have become more constrained. 3.12 Financial planning for 2025/26 indicates that the IJB is not currently able to build a general reserve at the 2% target level. This underlines the need for a more pragmatic and phased approach. 3.13 In recognition of the current financial challenges, it is proposed that the IJB adopts a stepped approach to rebuilding general reserves over the next three to five years. This process will be closely aligned with the development of the revised Medium Term Financial Strategy (MTFS), ensuring that financial planning and strategic priorities are aligned over the same timeframe. 3.14 A revised Medium-Term Financial Strategy (MTFS) will be presented to the Integration Joint Board (IJB) for consideration by the end of 2025. Page 29 of 120
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Midlothian Integration Joint Board 4 Policy Implications 4.1 This reserves policy if approved will continue to be one of the IJBs policies. 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 A reserve can be used as part of the financial risk management process. Given that this reserve may take several years to build up other risk management process may have to be put in place, this will be managed as required through Audit and Risk Committee and escalated, where required, to the Board. 8.2 The lack of a general reserve reduces the IJB’s ability to respond to unforeseen cost pressures. 8.3 There is an increased reliance on partner bodies to cover overspends, potential staining relationships and creating operational uncertainty. 9 Involving people 9.1 This report has been written following consultation with our NHS Lothian and Midlothian Council financial Partners, officers of Midlothian IJB, and with the Midlothian HSCP executive management team. 10 Background Papers 10.1 There are no background papers. AUTHOR’S NAME & DESIGNATION Chris King, Chief Finance Officer CONTACT INFO Chris.King@nhs.scot DATE 07/05/2025 Appendices: Appendix 1: Midlothian IJB Reserve Policy (2017) Appendix 2: Draft Midlothian IJB Reserve Policy (2025) Page 30 of 120
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Midlothian Integration Joint Board Page 5 Reserves Policy - Index No Page 4 4 5 1. Background 2. Statutory / Regulatory Framework for Reserves 3. Operation of Reserves 4. Role of the Chief Financial Officer 5 5. Adequacy of the Reserves 5 6. Reporting Framework 6 7. Accounting and Disclosure 6 Page 31 of 120
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Midlothian Integration Joint Board Page 6 1. Background 1.1 To assist local authorities (and similar bodies) in developing a framework for reserves, CIPFA have issued guidance in the form of the Local Authority Accounting Panel (LAAP) Bulletin 55 – Guidance Note on Local Authority Reserves and Balances. This guidance outlines the framework for reserves, the purpose of reserves and some key issues to be considered when determining the appropriate level of reserves. As the Midlothian Integration Joint Board has the same legal status as a local authority, i.e. a section 106 body under the Local Government (Scotland) Act 1973 Act, and is classified as a local government body for accounts purposes by the Office of National Statistics (ONS), it is able to hold reserves which should be accounted for in the financial accounts and records of the Integration Joint Board. 1.2 The purpose of a reserve policy is to: • outline the legislative and regulatory framework underpinning the creation, use or assessment of the adequacy of reserves; • identify the principles to be employed by the Integration Joint Board in assessing the adequacy of the Integration Joint Board’s reserves; • indicate how frequently the adequacy of the Integration Joint Board’s balances and reserves will be reviewed; and • set out arrangements relating to the creation, amendment and use of reserves and balances. 1.3 In common with local authorities, the Integration Joint Board can have reserves within a usable category. 2. Statutory/Regulatory Framework for Reserves Usable Reserves 2.1 Local Government bodies - which includes the Integration Joint Board for these purposes - may only hold usable reserves for which there is a statutory or regulatory power to do so. In Scotland, the legislative framework includes: Usable Reserve Powers General Fund Local Government Scotland Act 1973 Page 32 of 120
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Midlothian Integration Joint Board Page 7 2.2 For each reserve there should be a clear protocol setting out: • the reason / purpose of the reserve; • how and when the reserve can be used; • procedures for the reserves management and control; and • the review timescale to ensure continuing relevance and adequacy. 3. Operation of Reserves 3.1 Reserves are generally held to do three things: • create a working balance to help cushion the impact of uneven cash flows and avoid unnecessary temporary borrowing – this forms part of general reserves; • create a contingency to cushion the impact of unexpected events or emergencies – this also forms part of general reserves; and • create a means of building up funds, often referred to as earmarked reserves, to meet known or predicted liabilities. 3.2 The balance of the reserves normally comprises of three elements: • funds that are earmarked or set aside for specific purposes. In Scotland, under Local Government rules, the Integration Joint Board cannot have a separate Earmarked Reserve within the Balance Sheet, but can highlight elements of the General Reserve balance required for specific purposes. The identification of such funds can be highlighted from a number of sources: future use of funds for a specific purpose, as agreed by the Integration Joint Board; or commitments made under delegated authority by Chief Officer, which cannot be accrued at specific times (e.g. year end) due to not being in receipt of the service or goods; • funds which are not earmarked for specific purposes, but are set aside to deal with unexpected events or emergencies; and • funds held in excess of the target level of reserves and the identified earmarked sums. Reserves of this nature can be spent or earmarked at the discretion of the Integration Joint Board. Page 33 of 120
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Midlothian Integration Joint Board Page 8 4. Role of the Chief Financial Officer 4.1 The Chief Financial Officer is responsible for advising on the targeted optimum levels of reserves the Integration Joint Board would aim to hold (the prudential target). The Integration Joint Board, based on this advice, should then approve the appropriate reserve strategy as part of the budget process. 5. Adequacy of Reserves 5.1 There is no guidance on the minimum level of reserves that should be held. In determining the prudential target, the Chief Financial Officer must take account of the strategic, operational and financial risks facing the Integration Joint Board over the medium term and the Integration Joint Board’s overall approach to risk management. 5.2 In determining the prudential target, the Chief Financial Officer should consider the Integration Joint Board’s Strategic Plan, the medium term financial outlook and the overall financial environment. Guidance also recommends that the Chief Financial Officer reviews any earmarked reserves as part of the annual budget process and development of the Strategic Plan. 5.3 In light of the size and scale of the Integration Joint Board’s responsibilities, over the medium term it is proposed that a prudent level of general reserves will represent approximately 2% of net expenditure. This value of reserves must be reviewed annually as part of the Integration Joint Board Budget and Strategic Plan; and in light of the financial environment at that time. The level of other earmarked funds will be established as part of the annual financial accounting process. 6. Reporting Framework 6.1 The Chief Financial Officer has a fiduciary duty to ensure proper stewardship of public funds. 6.2 The level and utilisation of reserves will be formally approved by the Integration Joint Board based on the advice of the Chief Financial Officer. To enable the Integration Joint Board to reach a decision, the Chief Financial Officer should clearly state the factors that influenced this advice. Page 34 of 120
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Midlothian Integration Joint Board Page 9 6.3 As part of the budget report the Chief Financial Officer should state: • the current value of general reserves, the movement proposed during the year and the estimated year-end balance and the extent that balances are being used to fund recurrent expenditure; • the adequacy of general reserves in light of the Integration Joint Board’s Strategic Plan, the medium term financial outlook and the overall financial environment; • an assessment of earmarked reserves and advice on appropriate levels and movements during the year and over the medium term; and • if the reserves held are under the prudential target, that the Integration Joint Board should be considering actions to meet the target through their budget process. 7. Accounting and Disclosure 7.1 Expenditure should not be charged direct to any reserve. Any movement within Revenue Reserves is accounted for as an appropriation and is transparent. Entries within a reserve are specifically restricted to ‘contributions to and from the revenue account’ with expenditure charged to the service revenue account. Page 35 of 120
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Midlothian Integration Joint Board Reserve Policy Page 37 of 120
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Midlothian Integration Joint Board Page 2 1. Background To assist local authorities (and similar bodies) in developing a framework for reserves, CIPFA have issued guidance in the form of the Local Authority Accounting Panel (LAAP) Bulletin 55 – Guidance Note on Local Authority Reserves and Balances. This guidance outlines the framework for reserves, the purpose of reserves and some key issues to be considered when determining the appropriate level of reserves. As the Midlothian Integration Joint Board has the same legal status as a local authority, i.e. a section 106 body under the Local Government (Scotland) Act 1973 Act, and is classified as a local government body for accounts purposes by the Office of National Statistics (ONS), it is able to hold reserves which should be accounted for in the financial accounts and records of the Integration Joint Board. The purpose of a reserve policy is to: • Outline the legislative and regulatory framework underpinning the creation, use or assessment of the adequacy of reserves. • Identify the principles to be employed by the Integration Joint Board in assessing the adequacy of the Integration Joint Board’s reserves. • Indicate how frequently the adequacy of the Integration Joint Board’s balances and reserves will be reviewed. • Set out arrangements relating to the creation, amendment and use of reserves and balances. In common with local authorities, the Integration Joint Board can have reserves within a usable category. 2. Statutory/Regulatory Framework for Reserves Usable Reserves: Local Government bodies - which includes the Integration Joint Board for these purposes - may only hold usable reserves for which there is a statutory or regulatory power to do so. In Scotland, the legislative framework includes: Usable Reserve Powers General Fund Local Government Scotland Act 1973 For each reserve there should be a clear protocol setting out: • The reason / purpose of the reserve; • How and when the reserve can be used; • Procedures for the reserves management and control; and Page 38 of 120
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Midlothian Integration Joint Board Page 3 • The review timescale to ensure continuing relevance and adequacy. 3. Operation of Reserves Reserves are generally held to do three things: • Create a working balance to help cushion the impact of uneven cash flows and avoid unnecessary temporary borrowing – this forms part of general reserves; • Create a contingency to cushion the impact of unexpected events or emergencies – this also forms part of general reserves; and • Create a means of building up funds, often referred to as earmarked reserves, to meet known or predicted liabilities. The balance of the reserves normally comprises of three elements: • Funds that are earmarked or set aside for specific purposes. In Scotland, under Local Government rules, the Integration Joint Board cannot have a separate Earmarked Reserve within the Balance Sheet but can highlight elements of the General Reserve balance required for specific purposes. The identification of such funds can be highlighted from several sources: ▪ Future use of funds for a specific purpose, as agreed by the Integration Joint Board; or ▪ Commitments made under delegated authority by Chief Officer, which cannot be accrued at specific times (e.g. yearend) due to not being in receipt of the service or goods. • Funds which are not earmarked for specific purposes, but are set aside to deal with unexpected events or emergencies; and • Funds held in excess of the target level of reserves and the identified earmarked sums. Reserves of this nature can be spent or earmarked at the discretion of the Integration Joint Board. Page 39 of 120
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Page 4 of 5 4. Generation of Reserves The accumulation of reserves shall be the result of planned underspends against operational budgets and must be demonstrably linked to Directions issued by the Integration Joint Board (IJB), in accordance with the Integration Scheme. Where an underspend arises fortuitously and is not attributable to an IJB Direction, the associated funds shall be returned to the relevant Party through an appropriate adjustment to the payments made to the IJB. 5. Role of the Chief Financial Officer The Chief Financial Officer is responsible for advising on the targeted optimum levels of reserves the Integration Joint Board would aim to hold (the prudential target). The Integration Joint Board, based on this advice, should then approve the appropriate reserve strategy as part of the budget process. 6. Adequacy of Reserves There is no formal guidance on the minimum level of reserves that should be held. In determining the prudential target, the Chief Financial Officer must take account of the strategic, operational and financial risks facing the Integration Joint Board over the medium term and the Integration Joint Board’s overall approach to risk management. In determining the prudential target, the Chief Financial Officer should consider the Integration Joint Board’s Strategic Plan, the medium-term financial outlook and the overall financial environment. Guidance also recommends that the Chief Financial Officer reviews any earmarked reserves as part of the annual budget process and development of the Strategic Plan. In light of the size and scale of the Integration Joint Board’s responsibilities, over the medium term it is proposed that a prudent level of general reserves will represent approximately 2% of net expenditure. This value of reserves must be reviewed annually as part of the Integration Joint Board Budget and Strategic Plan, and in light of the financial environment at that time. The level of other earmarked funds will be established as part of the annual financial accounting process. 7. Reporting Framework The Chief Finance Officer has a fiduciary duty to ensure proper stewardship of public funds. The level and utilisation of reserves will be formally approved by the Integration Joint Board based on the advice of the Chief Financial Officer. To enable the Integration Joint Board to reach a decision, the Chief Financial Officer should clearly state the factors that influenced this advice. As part of the budget report the Chief Financial Officer should state: Page 40 of 120
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Page 5 of 5 • The current value of general reserves, the movement proposed during the year and the estimated year-end balance and the extent that balances are being used to fund recurrent expenditure; • The adequacy of general reserves in light of the Integration Joint Board’s Strategic Plan, the medium term financial outlook and the overall financial environment; • An assessment of earmarked reserves and advice on appropriate levels and movements during the year and over the medium term; and • If the reserves held are under the prudential target, that the Integration Joint Board should be considering actions to meet the target through their budget process. 8. Accounting and Disclosure Expenditure should not be charged direct to any reserve. Any movement within Revenue Reserves is accounted for as an appropriation and is transparent. Entries within a reserve are specifically restricted to ‘contributions to and from the revenue account’ with expenditure charged to the service revenue account. Page 41 of 120
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Midlothian IJB Audit and Risk Committee Thursday, 5th June 2025, 14:00-16:00 Midlothian IJB Annual Governance Statement 2024/25 Executive summary The purpose of this report is to present the draft Annual Governance Statement 2024/25 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 2025. The MIJB Audit and Risk Committee is therefore asked to: Consider the Midlothian Health and Social Care Integration Joint Board Draft Annual Governance Statement 2024/25 (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 2025, and provide any commentary thereon and approve for inclusion in the draft Annual Accounts 2024/25. # Item number: 5.5 MIJB – Audit & Risk Committee Thursday 5 June 2025 Item No 5.5 Page 43 of 120
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Midlothian Integration Joint Board Report Midlothian IJB Annual Governance Statement 2024/25 1 Purpose 1.1 The purpose of this report is to present the draft Annual Governance Statement 2024/25 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 2025. 2 Recommendations 2.1 Members of the MIJB Audit and Risk Committee are asked to: Consider the Midlothian Health and Social Care Integration Joint Board Draft Annual Governance Statement 2024/25 (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 2025, and provide any commentary thereon and approve for inclusion in the draft Annual Accounts 2024/25. 3 Background and main report 3.1 The Midlothian Integration Joint Board (MIJB), established as a separate legal entity as required by the Act, is responsible for the strategic planning and commissioning of a wide range of integrated health and social care services across the Midlothian partnership area, based on resources which have been delegated to it by the partners, Midlothian Council and NHS Lothian. 3.2 Regulation 5(2) of the Local Authority Accounts (Scotland) Regulations 2014 requires an authority to conduct a review at least once in a year of the effectiveness of its system of internal control and include a statement reporting on the review with any published Statement of Accounts. Regulation 5(4) of the Local Authority Accounts (Scotland) Regulations 2014 require that for a local authority in Scotland the statement is an Annual Governance Statement. 3.3 The CIPFA Good Governance Framework states that Local authorities are required to prepare an annual governance statement in order to report publicly on the extent to which they comply with their own code of governance, which in turn is consistent with the good governance principles in this Framework. This includes how they have monitored and evaluated the effectiveness of their governance arrangements in the year, and on any planned changes in the coming period. 3.4 The MIJB Audit & Risk Committee remit includes a review the IJB’s corporate governance arrangements against the good governance framework and consider annual governance reports and assurances. This paper and approval of the Annual Governance Statement fulfils this part of the remit. Page 44 of 120
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Midlothian Integration Joint Board 4 Directions 4.1 There are no Directions implications arising from this report. 5 Equalities Implications 5.1 There are no direct equalities implications arising from this report. 6 Resource Implications 6.1 There are no direct resource implications as a result of this report. 7 Risk 7.1 There are no direct risk implications as a result of this report. 8 Involving people 8.1 The Audit & Risk Committee are being given initial review of the Annual Governance Statement which will be reviewed by the MIJB Chair, Chief Officer and Chief Finance Officer as part of the Annual Accounts process. Audit Scotland as the appointed External Auditors will also review the Annual Governance Statement as part of the Annual Accounts review. 9 Background Papers 9.1 There are no background papers. AUTHOR’S NAME Duncan Stainbank DESIGNATION MIJB Chief Internal Auditor CONTACT INFO Duncan.Stainbank@midlothian.gov.uk DATE 26 May 2025 Appendices: Appendix 1: Draft Annual Governance Statement Page 45 of 120
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Appendix 1: MIJB Annual Governance Statement 2024/25 Introduction The Annual Governance Statement explains the MIJB’s governance arrangements and system of internal control and reports on their effectiveness. Scope of Responsibility The MIJB is responsible for ensuring that its business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for and used economically, efficiently and effectively. To meet this responsibility, the MIJB has established arrangements for governance which includes a system of internal control. The system is intended to manage risk to support the achievement of the MIJB’s policies, aims and objectives. Reliance is also placed on NHS Lothian and Midlothian Council’s (the partners) systems of internal control that support compliance with both organisations’ policies and promotes achievement of each organisation’s aims and objectives, as well as those of the MIJB. The system can only provide reasonable and not absolute assurance of effectiveness. The Governance Framework and Internal Control System The Board of the MIJB comprises voting members, nominated by either NHS Lothian or Midlothian Council, as well as non-voting members including a Chief Officer appointed by the Board. The current MIJB Local Code of Corporate Governance (MIJB Local Code), which was approved by the Board on 8 April 2021, sets out the framework and key principles, which require to be complied with, to demonstrate effective governance. The MIJB Local Code reflects the changing context of integration and is consistent with the principles and recommendations of the CIPFA/SOLACE Framework ‘Delivering Good Governance in Local Government’ (2016) and the supporting guidance notes for Scottish authorities. The overall aim of the Framework is to ensure that: resources are directed in accordance with agreed policy and according to priorities; there is sound and inclusive decision making; and there is clear accountability for the use of those resources in order to achieve desired outcomes for service users and communities. The main features of the governance framework and internal control system associated with the seven core principles of good governance defined in the MIJB Local Code in existence during 2024/25 included: 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 the Board and NHS Lothian in June 2022, which serves as the approved constitution, and Standing Orders, a revision of which was approved by the Board in February 2023, to make sure that public business is conducted with fairness and integrity. The Ethical Standards in Public Life (Scotland) Act 2000 provides for Codes of Conduct for local authority councillors and members of relevant public bodies. As a Public Body listed in schedule 3 of the Act, 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 which take account of values and ethical behaviour; • identifying, mitigating and recording conflicts of interest, hospitality and gifts; and • procurement of goods and services which are sustainable, represent value of money and which 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 the statement. Page 47 of 120
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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 Chief Financial 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. 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 Plans of the Health and Social Care Integration Joint Board were developed following consultations with interested parties including members of the public. The Midlothian IJB complaints procedure was established in 2017. This procedure is currently being reviewed and will be considered by the Audit and Risk Committee ahead of recommendation to the board for approval. C. Defining outcomes in terms of sustainable economic, social, and environmental benefits The vision, strategic objectives and outcomes are reflected in the Midlothian Health & Social Care Integration Joint Board third Strategic Plan 2022-25 was approved in April 2022 and has been updated to reflect on-going assessment of need and priorities following public consultation. Implementation is underpinned by the associated Directions, on which progress reports are presented to the Board. The process of developing the 2025-2035 strategic plan has been underway since August 2023 and a draft plan is progressing through the governance route of both partners ahead of publication, currently planned for October 2025. Implications are considered during the decision making process within the standard report template covering Policy, Equalities, Resources, Risk, and Involving People. 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. In line with statutory requirements, both the Midlothian IJB Public Engagement Statement and the Midlothian IJB Community Engagement Self-Assessment and Action plan are currently under review by the Strategic Planning Group. The statutory consultation plan for the Midlothian IJB draft Strategic Plan as approved by Midlothian IJB on 20th June 2024. Substantial stakeholder consultation has already been completed in the development of the draft Midlothian IJB Strategic Plan 2025-2035 to date. The MIJB has issued Directions to the partners, most recently on 28th March 2025 for 2025/26 Directions for service delivery and for service redesign and recommissioning in line with the transformation programme. 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/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 has also undertaken a Self-Assessment first completed in August 2023 with an improvement plan being approved. Midlothian IJB review this plan in April 2025 with formal approval the due from the MIJB Board. A 3 year Integrated Workforce Plan 2025-28 was approved by the MIJB in February 2025 to allow delivery to the Scottish Government in March 2025. The Workforce This plan is aligned to the MIJB medium-term financial strategy and supports the delivery of the MIJB Strategic Plan 2025-2035 to Page 48 of 120
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improve outcomes for people and communities. Midlothian IJB awaits feedback from Scottish Government where after an improvement plan and a publication date will be agreed. F. Managing risks & performance through robust internal control & 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. 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 monitoring risk management activity and performance. This Strategy has been updated and presented to the June 2024 Audit & Risk Committee with the Risk Management Policy being approved by the MIJB Board in October 2024 Regular risk reporting is completed to the MIJB Audit & Risk Committee. The MIJB Chief Financial 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; and • 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 is the MIJB’s Chief Internal Auditor whose role is to provide an independent and objective annual opinion on the effectiveness of the MIJB’s internal controls, risk management and governance. This is carried out in conformance with the Public Sector Internal Audit Standards. 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 & Risk Committee updated the terms of reference in June 2024 and have now recruited an independent member in line with CIPFA best practice. Performance Reports were presented to the Board for monitoring and control of achievement of Local Improvement Goals. An Annual Performance Report for 2023/24 was presented to the IJB Board for review priori to publication in October 2024. The Annual Accounts and Report for 2024/25 will set out the financial position in accordance with relevant accounting regulations and is being prepared. Review of Adequacy and Effectiveness 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; and relevant partners’ (NHS Lothian and Midlothian Council) Internal Audit and External Audit reports. In respect of the three improvement areas of governance identified by the MIJB in 2023/24, there have been developments during the year in all three of these. Specifically, the IJB Strategic Plan and the Medium Term Financial Strategy continue to be further developed to include a more explicit link, however this work remains ongoing including the development of the new strategic plan during the year, governance processes to manage the monitoring of financial recovery plans have been put in place, closing all internal audit recommendations in this area and reporting to the IJB Board commenced in February 2025, the MIJB Publication scheme improvements closing all Internal Audit recommendations were completed in October 2024. In addition, the MIJB agreed a Directions Policy on 20th February 2025 alongside the process for linking the Directions Log and the HSCP Service Plans. Page 49 of 120
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Improvement Areas of Governance The review activity outlined above has identified the following areas where further improvement in governance arrangements can be made to enhance compliance with the Local Code: 1 The Medium Term Financial Strategy should be further developed to include a more explicit link to the Midlothian IJB Strategic Plan. 2 The MIJB Medium Term Financial Plan presented to the MIJB Board in October 2024 highlighted that the starting financial pressure for the 2025/26 financial year was £11.33 million with the overall financial pressure from 2025/26 to 2029/30 being £77.633 million, by February 2025 the starting pressure for 2025/26 had increased to £13.2million. In presenting a budget setting paper in March 2025 both partners had either offered or indicated increases of 11% for the 2025/26 MIJB funding leaving a £6.835million financial pressure remaining. Application of Operational and Strategic redesign recovery actions of £5.801million resulted in a remaining unbalanced budget position of £1.034 million with a reported expectation that sustainability funding for NHS Lothian would allow the setting of a Balance budget. The reliance on continued recovery plan savings and significant increases in partner budget support continues to highlight the significant financial position risks for the MIJB. Maintaining financial reporting of achievement of recovery actions, as well as overall budget position throughout the year will continue to be vital for the Board. 3 The MIJB retains no General Reserve and with the current financial position this creates further financial risk a review of the MIJB Reserve policy is required and underway during the 2025/26 financial year. The implementation of these actions to enhance the governance arrangements in 2025/26 will be driven and monitored by the MIJB Chief Officer in order to inform the next annual review. Internal Audit work planned in 2025/26 is designed to test improvements and compliance in governance. Conclusion and Opinion on Assurance It is our opinion that reasonable assurance can be placed upon the adequacy and effectiveness of the MIJB’s governance arrangements and system of internal control, while recognising that further improvements are required to fully demonstrate compliance with the Local Code in order for the MIJB to fully meet its principal objectives. Systems are in place to regularly review and improve governance arrangements and the system of internal control. ___________________ ______________________ Morag Barrow Connor McManus Chief Officer MIJB Chair of the MIJB Page 50 of 120
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Midlothian Audit and Risk Committee Thursday, 5th June 2025 14:00-16:00 2024/25 Draft Unaudited Annual Accounts. Executive summary 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: • Consider the attached draft annual accounts, noting that some performance detail in the management commentary is incomplete. • Approve this draft and give delegated the authority to Morag Barrow in her capacity as Chief Officer to publish a set of unaudited annual accounts for 2024/25 on the Midlothian Heath and Social Care Website by 30th June 2025. Item number: 5.6 MIJB – Audit & Risk Committee Thursday 5 June 2025 Item No 5.6 Page 51 of 120
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Midlothian Integration Joint Board Report 2024/25 Draft Unauditied Annual Accounts 1 Purpose 1.1 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. 2 Recommendations 2.1 As a result of this report, Members are asked to: • Consider the attached draft annual accounts, noting that some performance detail in the management commentary is incomplete . • Approve this draft and give delegated the authority to Morag Barrow in her capacity as Chief Officer to publish a set of unaudited annual accounts for 2024/25 on the Midlothian Heath and Social Care Website by 30th June 2025. 3 Background and main report 3.1 Midlothian IJB is corporate body as defined under s106 of the local government (Scotland) act 1973. This Act requires Midlothian IJB to produce a set on Annual Accounts at the end of each financial year. 3.2 In practice there are three steps • To prepare a set of unaudited accounts approved for publication by Midlothian IJB on the Midlothian Health and Social Care website before 30th June 2025. • Present these accounts to Midlothian IJB’s appointed Auditors (Audit Scotland) who undertake an audit. • Prepare a final set of accounts reflecting the appointed auditors comments and including their own formal view on the accounts. This will be presented to the IJB’s Audit and Risk Committee on 4th September 2025 prior to presentation for approval at the Midlothian IJB Special Board meeting on 18th September 2025. The audited and approved set of annual accounts will then be published on the Midlothian Health and Social Care website as soon as practicably possible. 3.3 There are five sections to the annual accounts: 1 A description of what the IJB is and how it operates. 2 A management commentary in two sections a) A reflection of the financial performance of the IJB and a consideration of the financial challenges in the next financial year Page 52 of 120
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Midlothian Integration Joint Board b) A reflection of the work the IJB has undertaken during the year to deliver the ambitions of the strategic plan. 3 A section to provide assurance on governance including the Annual Governance Statement (AGS) prepared by the IJB’s Chief Internal Auditor. This AGS will be brought to Midlothian IJB’s Audit and Risk committee on 5th June 2025. 4 A report from the appointed auditors. This will not be available until after the appointed auditors have completed their audit. 5 The annual account details. 3.4 The section reflecting the work Midlothian IJB across 2024/25 remains incomplete at this time. The information required to complete this is provided by the Midlothian IJB Annual Performance Report (APR). Due to the timing of the release of Public Health Scotland (PHS) validated data, this cannot be completed until July 2025. Following Midlothian IJB approving the publication of the APR, this information will be added to the Annual Accounts. 3.5 In addition, Midlothian IJB has a statutory duty to adhere to the Model Scheme of Publication and must ensure that all content meets the accessibility requirements of this scheme. 3.6 The Midlothian IJB Audit and Risk Committee reviewed this set of draft Annual Accounts on 5th June and a verbal update will be provided on revisions and additions required ahead of the Midlothian IJB Special Board meeting on 18th September 2025. 4 Policy Implications 4.1 There are no new policy implication as a result of this report. 5 Directions 5.1 There are no direct implications for Directions as a result of this report 6 Equalities Implications 6.1 There are no equalities implication arising from this paper 7 Resource Implications 7.1 There are no direct resource implications for the IJB arising from this report. 8 Risk 8.1 The risk of inadequate financial resources being available to the IJB is included in the IJB’s risk register. 9 Involving people 9.1 The IJB holds its meetings in public and makes its papers publicly available. Page 53 of 120
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Midlothian Integration Joint Board 10 Background Papers 10.1 There are no background papers for this report. AUTHOR’S NAME Chris King DESIGNATION Chief Finance Officer CONTACT INFO Chris.King@nhs.scot DATE 12/05/2025 Appendices: Appendix 1: Draft Unaudited Annual Accounts 2024/25 Page 54 of 120
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1 Midlothian Integration Joint Board (IJB) Unaudited Annual Accounts 2024/25 The Annual Accounts of Midlothian Integration Joint Board for the period from 1 April 2024 to 31 March 2025, prepared pursuant to Section 105 of the Local Government (Scotland) Act 1973 and in accordance with the terms of the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2024/25. Page 55 of 120
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2 Contents Audit Arrangements ................................................................................. 3 Management Commentary....................................................................... 4 IJB Financial Performance in 2024/25 ..................................................... 11 Statement of Responsibilities ................................................................. 19 Remuneration Report ............................................................................. 21 Annual Governance Statement 2024/25 ................................................. 24 Independent Auditor’s Report ................................................................ 25 Comprehensive Income and Expenditure Statement ............................... 26 Movement in Reserves Statement .......................................................... 27 Balance Sheet ....................................................................................... 28 Notes to the Financial Statements .......................................................... 29 Page 56 of 120
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3 Audit Arrangements Under arrangements approved by the Accounts Commission of Local Authority Accounts in Scotland, the auditor with responsibility for the audit of the accounts of Midlothian Integration Joint Board for the period 1 April 2024 to 31 March 2025 is Audit Scotland, 102 West Port, Edinburgh EH3 9DN. Page 57 of 120
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4 Management Commentary The role and responsibilities of the IJB The IJB is an Integration Authority set up under the Public Bodies (Joint Working) (Scotland) Act (2014). The IJB plans for the delivery of functions that have been delegated to it by Midlothian Council and NHS Lothian. These are: • Adult Social Care • 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). The IJB assumed formal responsibility for these functions in April 2016 including the budgets to deliver them. Midlothian IJB approved its third Strategic Plan for 2022-2025 in April 2022. In August 2023, work began to develop the draft Strategic Plan for 2025-2035. This new Strategic Plan is currently being reviewed by the relevant Committees and Boards of both our NHS Lothian and Midlothian Council Partners. The scheduled publication date of the Midlothian IJB Strategic Plan 2025-2035 is October 2025. Page 58 of 120
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5 Membership of IJB The IJB met 8 times in 2024/25 for formal business meetings. There were also 5 IJB Development sessions and 2 additional financial briefings. The members of the IJB as of March 2025 Member Nominated/Appointed by Role Conor McManus Nominated by Midlothian Council Voting Member, Chair Val de Souza Nominated by NHS Lothian Voting Member, Vice Chair and Chair of the Audit and Risk Committee Pauline Winchester Nominated by Midlothian Council Voting Member Derek Milligan Nominated by Midlothian Council Voting Member Kelly Parry Nominated by Midlothian Council Voting Member Dr Amjad Khan Nominated by NHS Lothian Voting Member Andrew Fleming Nominated by NHS Lothian Voting Member Vacant Nominated by NHS Lothian Voting Member Morag Barrow Appointed by the IJB Chief Officer Chris King Appointed by the IJB Interim Chief Finance Officer Nick Clater Nominated by Midlothian Council Social Work Representative Fiona Stratton Nominated by NHS Lothian Nursing Representative Claire Ross Nominated by NHS Lothian AHP Representative Dr Rebecca Green Nominated by NHS Lothian Primary Care Representative Dr Wendy Metcalfe Nominated by NHS Lothian Medical Practitioner Representative Grace Chalmers Nominated by Midlothian Council Partnership Representative (MLC) Jordan Miller Nominated by NHS Lothian Partnership Representative (NHS) Magda Clark Appointed by the IJB Third Sector Representative Keith Chapman Appointed by the IJB Lived Experience Representative Vacant Volunteer Representative Vacant Carer Representative Notes David King was the IJB’s Chief Finance Officer until 5th of December 2024 when he retired. Chris King has been appointed as interim Chief Finance Officer until a permanent appointment can be made. Page 59 of 120
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6 IJB Vision and Objectives The IJB’s vision and objectives are laid out in the IJB’s Integration Scheme, and these reflect 9 national health and wellbeing outcomes which apply to integrated health and social care. These are: The IJB also contributes to the achievement of the national criminal justice outcomes. This is because the NHS Lothian and Midlothian Council agreed to delegate criminal justice social work to Midlothian IJB in the Midlothian Scheme of Integration. Page 60 of 120
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7 IJB Activities for the Year 2024/25 Strategic Plan The Public Bodies (Joint Working) (Scotland) Act 2014 places a statutory duty on the IJB to develop a Strategic Plan that directs how delegated health and social care functions will be planned and delivered. This includes how resources will be used to meet agreed priorities. Officers from Midlothian Health and Social Care Partnership (HSCP) established a dedicated project team in August 2023 to develop a Strategic Plan for 2025-2035. The approach has been guided by Scottish Government statutory guidance and has followed the required consultation and governance procedures led by the Strategic Planning Group (SPG), and involving NHS Lothian, Midlothian Council, third and independent sector partners, and the wider public. Between September and November 2023, an initial consultation gathered feedback on the 2022–2025 Strategic Plan and identified emerging priorities. This informed the development of strategic proposals, which were reviewed by the IJB during a development session in January 2024 and subsequently approved by the IJB in February 2024. A first draft of the new Strategic Plan was developed during February and March 2024 with a revised second draft produced following further IJB and Strategic Planning Group (SPG) sessions, leading to its approval in August 2024 for a statutory three- month public consultation period. During the consultation period (August–November 2024), the Strategic Planning Group conducted an Equality and Children’s Rights Impact Assessment, which informed final revisions. Feedback from consultation, the Impact Assessment, and the audit were incorporated into the draft, with final adjustments made in close consultation with both NHS Lothian and Midlothian Council. In December 2024, the IJB agreed to delay the publication of the final plan to ensure alignment with 2025/26 budget decisions and a reflection of operational transformation planning. Throughout the process, engagement with Partner organisations has been sustained through direct discussions with senior leaders, strategic leads, and representation on the Strategic Planning Group. The voices of more than 1,500 individuals, services, and organisations have contributed to the development of this plan. The Strategic Plan remains a dynamic and evolving document and is planned for publication in October 2025. Page 61 of 120
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8 Operational Performance The Annual Performance Report for 2024/25 will be published in August 2025. This will detail Midlothian’s progress and achievements in delivering against the IJB’s strategic priorities, as well as performance in relation to the Scottish Government’s national health and wellbeing outcomes and associated indicators. **Given the reporting timescales and the timing of national data releases, the current draft of the annual accounts does not yet include the updated performance information. This will be incorporated once the final performance data becomes available** Page 62 of 120
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9 Future Plans – Bold and Sustained Transformation Public sector finances are under significant pressure across Scotland. The wider economic climate and the ongoing cost of living crisis continue to create uncertainty. These financial challenges are intensified by a growing and ageing population, rising levels of frailty and long-term conditions, and increasing complexity in the care and support that people require. Workforce challenges and limited financial resources impact the ability to sustain current models of care. In response, the IJB recognises the urgent need for bold and sustained transformation. Our Strategic Plan and Medium-Term Financial Strategy will form the foundations for a new sustainable model for health and social care focusing on prevention, early intervention, and integrated, person led care. To achieve transformation on scale strong leadership, cross sector collaboration, and meaningful engagement with communities will be essential to ensure that services remain sustainable, equitable, and responsive to local needs. A Transformation Programme Board will develop and oversee these changes. They will: • Shift the focus away from specialist services toward a broader range of community-based services across health, social care, and primary care. • Invest more in early intervention, self-management, education, and primary and community care services. • Promote and embed a person-led, strengths-based approach to improve the outcomes that matter most to people and communities. • Build on the principles of the Public Bodies (Joint Working) (Scotland) Act 2014, to develop more personalised and flexible services, planned together. • Continue to support the implementation of the Social Care (Self-Directed Support) (Scotland) Act 2013, recognising individuals as experts in their own lives, with a range of assets and skills. • Develop a single point of access to help people navigate services more easily and get the right support at the right time. • Redirect resources to areas of high priority. This may mean disinvestment in some services. Workstreams that will support this transformation • Palliative Care • Bed based provision – Care Home and Community Hospitals • Home First Model of Care • Primary, Community and Social Care Page 63 of 120
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10 • Commissioning and Third sector • Community Assets • Mental Health/Dementia • Midlothian Community Front Door (Single Point of Access) Page 64 of 120
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11 IJB Financial Performance in 2024/25 For the year ending 31 March 2025 the IJB recorded a surplus of £0.149 million. The IJB incurred operational overspends in both Health and Social Care services during the 2024/25 financial year which amounted to £2.949 million and £4.883 million respectively. In line with the Integration Scheme, both Partners, NHS Lothian and Midlothian Council, provided additional year end funding allocations to fully cover these overspends. The reported surplus is a result of an increase in the level of Earmarked Reserves held by the IJB. These reserves are set aside to fund specific future commitments and priorities. Summary of the IJB’s financial position for the year ending 31 March 2025 Year-end Position Health £000’s Social Care £000’s Total £000’s Income 135,578 69,072 204,650 Income received from the partners Midlothian Council and NHS Lothian in 2024/25 Expenditure 135,018 69,483 204,501 Expenditure incurred by the partners in the delivery of the IJB’s delegated functions for 2024/25. Surplus/ (Deficit) 560 (411) 149 Analysis of Financial Position As in previous years, the main financial pressure contributing to the overspend within health services continues to be the cost of medications prescribed through GP services. These costs are exceeding the available budget due to a combination of increasing prices and growing demand. Price increases are influenced by the introduction of new medications, which are often expensive when first released. In parallel, the volume of prescriptions continues to rise, reflecting Midlothian’s growing and ageing population, and the associated need for increased medical intervention to support people’s health and wellbeing. Another contributing factor to the overspend in health services was the timing of financial recovery actions linked to service redesigns. While a number of planned financial recovery actions were implemented during the year, the full financial benefits Page 65 of 120
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12 were not realised in 2024/25 due to lead in times. The financial benefits associated with these plans are expected to materialise in full during the 2025/26 financial year. In Social Care services, the overspend was primarily driven by rising demand and increasing complexity of care needs. During 2024/25, a comprehensive review was undertaken of all commissioned care packages to ensure that individuals' needs were being met in the most appropriate and cost effective way. This review covered 585 care packages across a range of services. 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 available resources. Page 66 of 120
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13 Funding for the IJB The IJB is funded exclusively by its partners (Midlothian Council and NHS Lothian) to deliver the functions that are delegated to the IJB in the Midlothian Scheme of Integration. A significant proportion of the services that deliver this care and support are operationally managed by Midlothian HSCP. Budget offers (representing the funding) are made to the IJB by the partners before the start of each financial year. The IJB assesses these offers and bases its acceptance of these offers on the guidance from the Scottish Government which it issues as part of its own budget setting process. The IJB accepted the indicative budget offer from NHS Lothian and the formal budget offer from Midlothian Council in March 2024. NHS Lothian’s funding is for: • Health services in Midlothian (Core funding) This includes the running costs of the local hospitals, the community health services, the running costs of the Medical General Practitioners services (the local GPs) and a share of other primary care services (General Ophthalmic Services, General Dental Services and General Pharmaceutical services). • Health services for Midlothian residents, delivered and managed on a pan- Lothian basis by NHS Lothian (Hosted funding). This includes Mental Health inpatients beds at the Royal Edinburgh Hospital. • Unscheduled health services for Midlothian residents, delivered and managed by NHS Lothian’s Acute Services (Set Aside funding) This is delivered at the Royal Infirmary of Edinburgh, the West General Hospital and St. John’s Hospital at Howden. This is budget ‘set aside’ by NHS Lothian on behalf of the IJB. Midlothian Council’s funding is for: • Adult Social Care services in Midlothian Reserves During the 2023/24 financial year, the IJB fully utilised all of its general reserve. As a result, there were no reserves available to mitigate unforeseen financial pressures in 2024/25. This is a financial risk to both the IJB and its partners, as it significantly reduces the IJB’s financial resilience and ability to respond to emerging cost pressures or volatility. In response to this risk, the IJB has requested a comprehensive review of its current reserves policy. The existing policy sets out an aspiration to maintain a general reserve equivalent to 2% of annual expenditure. The Chief Finance Officer will lead this review across 2025/26, assess whether the current target remains appropriate, and consider how financial resilience can be reestablished over time. The outcomes of the review will Page 67 of 120
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14 be presented to the IJB’s Audit and Risk Committee prior to making a recommendation to the IJB. IJB spend in 2024/25. The Financial Statements are all presented on a net basis. Performance of the functions that are delegated to the IJB for 2024/25 Health Social Care Health Social Care Variance Note Budget Budget Expenditure Expenditure £000’s £000’s £000’s £000’s £000’s Direct Midlothian Services Community AHPS 3,828 0 3,772 0 56 Community Hospitals 7,146 0 7,142 0 4 District Nursing 9,002 0 9,228 0 (225) General Medical Services 19,549 0 19,726 0 (176) Health Visiting 2,784 0 2,720 0 64 Mental Health 3,215 0 3,045 0 170 Other 8,895 0 9,578 0 (683) 1 Prescribing 20,472 0 22,285 0 (1,814) Resource Transfer 6,973 0 6,941 0 31 2 Older People 0 29,412 0 31,908 (2,495) Learning Disabilities 0 21,298 0 24,456 (3,158) Mental Health 0 1,314 0 1,132 182 Physical Disabilities 0 4,232 0 4,235 (3) Assessment & Care Management 0 4,113 0 3,608 505 Social Care Other 0 3,819 0 3,734 85 3 Midlothian Share of Pan Lothian Set Aside 20,192 0 20,728 0 (535) 4 Mental Health 2,899 0 3,070 0 (170) Learning Disabilities 1,322 0 1,333 0 (11) GP Out of Hours 1,553 0 1,513 0 40 Rehabilitation 990 0 884 0 106 Sexual Health 993 0 965 0 28 Psychology 1,757 0 1,782 0 (26) Substance Misuse 573 0 531 0 42 Allied Health Professions 1,739 0 1,664 0 75 Oral Health 1,034 0 838 0 197 Hosted Other 4,033 0 4,154 0 (121) Page 68 of 120
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15 Dental 7,231 0 7,231 0 0 5 Ophthalmology 2,117 0 2,117 0 0 5 Pharmacy 4,332 0 4,332 0 0 5 Sub Totals 132,628 64,188 135,578 69,072 (7,833) Partner Additional Contributions 2,949 4,883 0 0 7,833 6 Movement in Earmarked Reserves 0 0 (560) 411 149 7 Per Annual Accounts 135,578 69,072 135,018 69,483 149 Notes 1. Other includes £4.816m for the Social Care Fund which is held in the Health Budget but expended in the Social Care services. It also includes the impact of the addition to the Earmarked reserve – see point 7. 2. Resource Transfer are funds for specific purposes which are transferred from Health to Social Care. However, these remain part of the health budget and are reported there. 3. Social Care Other includes care for non-specific groups, substance misuse services and other management and performance costs. 4. Set Aside are the budgets for those functions delegated to the IJB which are managed by the Acute Services management teams within NHS Lothian. These services are delivered at the Royal Infirmary of Edinburgh, the Western General Hospital and St. John’s Hospital and cover the following: • Accident and Emergency • Cardiology • Diabetes • Endocrinology • Gastroenterology • General Medicine • Geriatric Medicine • Rehabilitation Medicine • Respiratory Medicine • Various ancillary support services for the above 5. Dental, Ophthalmology, Pharmacy - in the health system, expenditure to support the delivery of community dentistry, community opticians and community pharmacists is termed as ‘non-cash limited’ (NCL) but is clearly part of the delivery of primary care services and these functions are delegated to the IJB. However, being NCL there is no budget as such, but any expenditure incurred is supported in its entirety by the Scottish Government. The NCL values are not part of the budget setting process, there being no budget, but NHS Lothian has matched the NCL expenditure with income to cover this expenditure. 6. Additional contributions from Partners - In line with the Integration Scheme, as the IJB does not hold general reserves, any funding shortfalls incurred during the year are met by the respective partner. In 2024/25, the IJB experienced operational pressures in both Health and Social Care services. As a result, both NHS Lothian and Midlothian Page 69 of 120
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16 Council provided additional year-end funding to address the overspends within their respective areas of responsibility. 7. Movement in Earmarked Reserves - The net movement in Earmarked Reserves during the year resulted in a £0.149 million increase in reserves for the IJB. • Within Health, reserves held by NHS Lothian increased by £0.560 million, primarily due to the receipt of Unscheduled Care funding. Although this was processed through as expenditure, it is not considered in year spend and has therefore been excluded when calculating the IJB’s net position. • Within Social Care, Earmarked Reserve balances were used as planned, resulting in a drawdown of £0.411 million, which is reflected as expenditure. The charges (shown as expenditure above) made by Midlothian Council to the IJB are the net direct costs incurred in the delivery of social care in Midlothian. The charges from NHS Lothian are based on the health budget setting model as agreed by the IJB. That is, charges for the core services (specifically for and delivered by the Midlothian partnership) are based on the net direct actual costs incurred in Midlothian. However, charges for hosted and set aside services (not managed by the Midlothian Health and Social Care Partnership and are delivered on a pan-Lothian basis) are based on the total actual costs for these services shared across four IJBs per the budget setting model. The IJB share of the total actual costs incurred in 2023/24 for hosted services is 10% and, generally, 10% of the Lothian element of the set aside budgets and the non- cash limited budgets. How the IJB spent its funds in 2024/25 Spend 2024/25 £000’s Percentage Share % Adult Social Care Services £82,408 40% Primary Care Services £55,690 28% Other Community Health Services £45,675 22% Acute Services £20,728 10% Total £204,501 100% • Adult Social Care includes funds from NHS Lothian which are used to support social care (see note 6 at the end of this report) • Primary Care includes GPs, GP prescribing, community opticians, community pharmacists and community dental services • Other Community includes local community hospitals, community nursing services, community allied health professionals and Midlothian’s share of pan- Lothian hosted services • Acute includes Midlothian Share of Acute services that have been delegated to the IJB Page 70 of 120
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17 Consideration of the 2024/25 financial position At its March 2025 meeting, the IJB approved the budget offers received from both NHS Lothian and Midlothian Council and were able to set a balanced financial plan for 2025/26. This plan is underpinned by the delivery of £5.8 million in financial recovery actions covering both Health and Social Care functions. It was also agreed that there would be continued engagement with NHS Lothian to address the outstanding financial pressures within Set Aside services. This financial recovery programme represents a significant one year plan, designed to provide a foundation of financial stability for the IJB. 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. The IJB has acknowledged these risks and is committed to managing them proactively. Oversight and mitigation will be supported through established risk management frameworks within the Health and Social Care Partnership (HSCP) and through the governance role provided by the IJB’s Audit and Risk Committee & the IJB Board. Throughout 2025/26, the IJB 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 the IJB in adopting a forward looking and responsive approach to financial governance and management. The objective is to enable timely decision making, ensure the IJB operates within its 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. Key Risks, challenges and uncertainties The main financial pressures facing the IJB remain consistent with those outlined in the 2023/24 Annual Accounts. These pressures are significant and continuing, and they reflect both national trends and specific local challenges within Midlothian: 1. Demographic Change: A Growing and Ageing Population Midlothian has the fastest growing population in Scotland. While national funding formulas for both Local Authorities and NHS Boards aim to reflect population change, these mechanisms face two key limitations: • The total funding available has increased but not at a level sufficient to fully meet the scale of the pressures identified. Page 71 of 120
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18 • Declining populations in other areas do not automatically result in proportionate reductions in service delivery costs, which limits the system's ability to redistribute resources effectively. In addition, Midlothian’s population is not only growing but also ageing. As life expectancy increases, so too does the complexity and intensity of health and social care needs. This demographic trend represents a growing and long term challenge, both locally and nationally. 2. Workforce Availability Both Health and Social Care services continue to experience workforce shortages. The availability of skilled professionals remains a key constraint on the IJB’s ability to meet rising demand and deliver its Strategic Plan. A local workforce plan has been developed in collaboration with partners to mitigate this risk as much as possible. 3. The Wider National Financial Environment The financial landscape for public services remains extremely challenging. While the Scottish Government has expressed a strong commitment to protecting Health and Social Care budgets, it has also acknowledged the broader fiscal pressures facing all public services. National taxation and policy decisions, such as increases in employer National Insurance contributions, are likely to have an impact on service providers. These pressures may: • increase the cost of commissioned services, • threaten the financial sustainability of providers. The IJB does not have dedicated funding to offset these pressures. However, it remains actively engaged with providers and partners to manage the implications and support continuity of service delivery wherever possible. Conor McManus IJB Chair. Morag Barrow, Chief Officer. Chris King, Interim Chief Finance Officer. Page 72 of 120
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19 Statement of Responsibilities Responsibilities of the IJB The IJB is required to: • Make arrangements for the proper administration of its 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 its affairs to secure economic, efficient, and effective use of resources and safeguard its assets. • Ensure the Annual Accounts are prepared in accordance with legislation (The Local Authority Accounts (Scotland) Regulations 2014), and so far, as is compatible with that legislation, in accordance with proper accounting practices (section 12 of the Local Government in Scotland Act 2003). • Approve the Annual Accounts. I confirm that these Annual Accounts were approved for signature at a meeting of the Audit & Risk Committee. Signed on behalf of Midlothian Integration Joint Board. Conor McManus, IJB Chair. Page 73 of 120
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20 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 as at 31 March 2025 and the transactions for the year then ended. Chris King, Interim Chief Finance Officer Page 74 of 120
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21 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 holders alternates between a Councillor and a Health Board representative. The IJB does not provide any additional remuneration to the Chair, Vice Chair or any other board members relating to their role on the IJB. The IJB does not reimburse the relevant partner organisations for any voting board member costs borne by the partner. Neither the Chair nor the Vice Chair appointments had any taxable expenses paid by the IJB in 2024/25 (Previous Year: nil). The Chair of the IJB in 2024/25 was Councillor Connor McManus (who is an elected member of Midlothian Council), the Vice Chair was Val de Souza who is a non-executive member of the NHS Lothian Board. The IJB does not have responsibilities, either in the current year or in future years, for funding any pension entitlements of voting IJB members. Therefore, no pension rights disclosures are provided for the Chair or Vice Chair. NHS Lothian no longer automatically offers another full day’s remuneration for being the Board’s Lead Voting Member on an IJB. Instead, non-executive remuneration is based on an individual’s overall estimated time commitment, which can include multiple memberships of Board committees and IJBs as well as other responsibilities, not just as committee chairs or lead voting members of the IJBs. No specific remuneration is therefore available for the vice chair of the IJB in 2024/25 (Previous Year: nil). Page 75 of 120
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22 Remuneration: Officers of the IJB The IJB does not directly employ any staff; however specific post-holding officers are non-voting members of the Board. Chief Officer Under section 10 of the Public Bodies (Joint Working) (Scotland) Act 2014 a Chief Officer for the IJB has to be appointed and the employing partner has to formally second the officer to the IJB. The employment contract for the Chief Officer will adhere to the legislative and regulatory framework of the employing partner organisation. The remuneration terms of the Chief Officer’s employment are approved by the IJB. The Chief Officer of the IJB is Morag Barrow, who is also the Director of Health and Social Care for Midlothian Council and the Joint Director of the Midlothian Partnership. It has been agreed that 50% of her total remuneration is to be shown in the accounts of the IJB as her remuneration as the Chief Officer of the IJB. Chief Finance Officer Although the costs of the Chief Finance Officer are not included in the charges made to the IJB by either partner, given the S95 role of the Chief Finance Officer and in the interests of transparency, the remuneration of the Chief Finance Officer is included. David King was Chief Finance Officer until the 5th December 2024 and was employed by NHS Lothian and had two roles – Midlothian IJB’s Chief Finance Officer, the Chief Finance Officer of East Lothian IJB. On that basis, 50% of the total remuneration for David King between 1st April 2024 and 6th December 2024 is shown below. From the 19th of December 2024 until 31st March 2025, Chris King was appointed as Chief Finance Officer on an interim basis. He is employed by NHS Lothian. His role is that of Chief Finance Officer with Midlothian IJB and an operational role in the NHS Lothian finance team as a Finance Business Partner. Therefore, 50% of the total remuneration during this period is shown below. Other Officers No other staff are appointed by the IJB under a similar legal regime. Other non-voting board members who meet the criteria for disclosure are included in the disclosures. Senior Employees: Salary, Fees & Allowances: Name 2023/24 £ 2024/25 £ Morag Barrow (Note 1) £55,822 £59,048 Claire Flanagan £15,038 - David King (Note 2) £10,272 £23,522 Chris King - £11,832 Page 76 of 120
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23 Note 1: Morag Barrow became an active member of the SPPA in 2024/25. Note 2: David King is no longer an active member of the SPPA. 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 IJB’s funding during to support officers’ pension benefits. Name For year to 2024 £ For Year to 2025 £ Claire Flanagan £3,077 - Morag Barrow £0 £12,241 Chris King - £1,456 Total value of accrued pension benefits which may include benefits earned in other employment positions and from each officer’s own contributions Name Pension (as at 31 March 2024) £000’s Lump Sum (as at 31 March 2024) £000’s Pension (as at 31 March 2025) £000’s Lump Sum (as at 31 March 2025) £000’s Morag Barrow £0 £0 £30 £82 Claire Flanagan £22 £55 - - Chris King - - £9 £0 Disclosure by Pay Bands Pay band information is not separately provided as all staff pay information has been disclosed in the information above. Exit Packages The IJB did not support nor did it direct to be supported by its partners, any exit packages during 2024/25 (2023/24: nil). Conor McManus, IJB Chair. Morag Barrow, Chief Officer. Page 77 of 120
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24 Annual Governance Statement 2024/25 ***The annual governance statement will be included in the accounts following the review by the Audit & Risk Committee in June 2025*** Conor McManus, Chair Morag Barrow, Chief Officer Page 78 of 120
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25 Independent Auditor’s Report Independent auditor’s report to the members of Midlothian Integration Joint Board and the Accounts Commission ***This will be provided after the independent auditors have completed their audit.*** Page 79 of 120
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26 Comprehensive Income and Expenditure Statement This statement shows the cost of providing services for the year according to accepted accounting practices. Where the impact on the General Fund is amended by statutory adjustments, this is shown in both the Expenditure and Funding Analysis and the Movement in Reserves Statement. IJB Comprehensive Income and Expenditure Statement Income/Expenditure 2023/24 2024/25 Net Expenditure Net Expenditure £000’s £000’s Health Care Services - NHS Lothian £132,906 £135,018 Social Care Services - Midlothian Council £66,036 £69,483 Cost of Services £198,942 £204,501 Taxation and Non-Specific Grant Income (£186,584) (£204,650) Surplus/(deficit) on Provision of Services (£12,358) £149 The Integration scheme lays out that the partners will provide corporate and other support to the IJB as required and will not charge for these services. These costs are not, therefore, included. Page 80 of 120
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27 Movement in Reserves Statement The movement in reserves statement shows the value of the IJBs reserve and how this has reduced during 2024/25. Movements in Reserves during 2024/25 IJB Reserves Earmarked Reserves £000's General Reserves £000's Total Reserves £000's Opening Balance - 31/3/2024 £799 £0 £799 Drawdown of Reserve in year (£792) £0 (£792) Additions to Reserve in year £941 £0 £941 Closing Balance - 31/3/2025 £948 £0 £948 Movements in Reserves during 2023/24 IJB Reserves Earmarked Reserves £000's General Reserves £000's Total Reserves £000's Opening Balance - 31/3/2023 £6,975 £6,182 £13,157 Drawdown of Reserve in year (£6,176) (£6,182) (£12,358) Additions to Reserve in year £0 £0 £0 Closing Balance - 31/3/2024 £799 £0 £799 Page 81 of 120
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28 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 – Current Assets Net Current Assets 31 March 2024 £000’s 31 March 2025 £000’s Notes Debtors £799 £948 7 Creditors: amounts falling due within one year £0 £0 Total assets less current liabilities £799 £948 IJB Balance Sheet – Capital and Reserves Net Liabilities 31 March 2024 £000’s 31 March 2025 £000’s Notes Earmarked Reserve £799 £948 1 General Reserve £0 £0 1 Total Reserves £799 £948 See note 7 at end of report See note 1 at end of report - IJB usable reserves Chris King, Interim Chief Finance Officer. Page 82 of 120
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29 Notes to the Financial Statements 1 Significant Accounting Policies General Principles The Financial Statements summarise the IJB’s transactions for the 2024/25 financial year and its position at the year-end of 31 March 2025. The IJB was established under the requirements of the Public Bodies (Joint Working) (Scotland) Act 2014 and is a Section 106 body as defined in the Local Government (Scotland) Act 1973. The Financial Statements are prepared in compliance with the Code of Practice on Local Authority Accounting in the United Kingdom 2024/25, supported by International Financial Reporting Standards (IFRS), unless legislation or statutory guidance requires different treatment. The accounts are prepared on a going concern basis, which assumes that the IJB will continue in operational existence for the foreseeable future. The historical cost convention has been adopted. Basis of Preparation The IJB financial statements for 2024/25 have been prepared on a going concern basis. The IJB was established under the requirements of the Public Bodies (Joint Working) (Scotland) Act 2014 and is a Section 106 body as defined in the Local Government (Scotland) Act 1973. In accordance with the CIPFA Code of Local Government Accounting (2024/25), the IJB is required to prepare its financial statements on a going concern basis unless informed by the relevant national body of the intention for dissolution without transfer of services or function to another entity. The accounts are prepared on the assumption that the IJB will continue in operational existence for the foreseeable future. The IJB’s funding from and commissioning of services to partners has been confirmed for 2024/25, and a medium-term financial plan has been prepared through to 2028. Given that the IJB is wholly funded by the partners and the IJB’s Integration Scheme commits the partners to funding any overspend within the IJB I consider that there are no material uncertainties around its going concern status. Accruals of Income and Expenditure Activity is accounted for in the year that it takes place, not simply when settlement in cash occurs. In particular: • Expenditure is recognised when goods or services are received, and their benefits are used by the IJB • Income is recognised when the IJB has a right to the income, for instance by meeting any terms and conditions required to earn the income, and receipt of the income is probable Page 83 of 120
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30 • Where income and expenditure have been recognised but settlement in cash has not taken place, a debtor or creditor is recorded in the Balance Sheet • Where debts may not be received, the balance of debtors is written down Funding The IJB is wholly funded through funding contributions from the statutory funding partners, Midlothian Council and NHS Lothian. Expenditure is incurred in the form of net charges by the partners to the IJB. Cash and Cash Equivalents The IJB does not operate a bank account or hold cash. Transactions are settled on behalf of the IJB by the funding partners. Consequently, the IJB does not present a ‘Cash and Cash Equivalent’ figure on the balance sheet. Debtors and Creditors The funding balance due to or from each funding partner as at 31st of March is represented as a debtor or creditor on the IJB’s Balance Sheet. Where income and expenditure have been recognised but settlement in cash has not taken place, a debtor or creditor is recorded in the Balance Sheet. Employee Benefits The IJB does not directly employ staff. Staff are formally employed by the partners who retain the liability for pension benefits payable in the future. The IJB therefore does not present a Pensions Liability on its Balance Sheet. The IJB has a legal responsibility to appoint a Chief Officer. More details on the arrangements are provided in the Remuneration Report. Provisions, Contingent Liabilities and Contingent Assets Provisions are liabilities of uncertain timing or amount. A provision is recognised as a liability on the balance sheet when there is an obligation as at 31st of March due to a past event; settlement of the obligation is probable; and a reliable estimate of the amount can be made. Recognition of a provision will result in expenditure being charged to the Comprehensive Income and Expenditure Statement and will normally be a charge to the General Fund. A contingent liability is a possible liability arising from events on or before 31st of March, whose existence will only be confirmed by later events. A provision that cannot be reasonably estimated, or where settlement is not probable, is treated as a contingent liability. A contingent liability is not recognised in the IJB’s Balance Sheet but is disclosed in a note where it is material. A contingent asset is a possible asset arising from events on or before 31st of March, whose existence will only be confirmed by later events. A contingent asset is not recognised in the IJB’s Balance Sheet but is disclosed in a note only if it is probable to arise and can be reliably measured. The IJB has none of the above. Page 84 of 120
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31 Reserves The IJB’s reserves are classified as either Usable or Unusable Reserves. The IJB’s only Usable Reserve is the General Fund. The balance of the General Fund as at 31 March shows the extent of resources which the IJB can use in later years to support service provision. As noted above, the IJB has reserves of £948,000 on 31 March 2025. IJB useable reserve Reserves 2024/25 Closing Balance £000’s Embedding a gender informed effective response to domestic abuse Project £7 Unscheduled Care £941 General Reserves £0 Total £948 Indemnity Insurance The IJB has indemnity insurance for costs relating primarily to potential claim liabilities regarding Board member and officer responsibilities. NHS Lothian and Midlothian Council have responsibility for claims in respect of the services that they are statutorily responsible for and that they provide. The IJB holds separate indemnity insurance through its membership of the Clinical Negligence and Other Risks Indemnity Scheme (CNORIS) scheme, the charge for this in 2024/25 was £3,000 (PY £3,000). Unlike NHS Boards, the IJB does not have any ‘shared risk’ exposure from participation in CNORIS. The IJB participation in the CNORIS scheme is therefore analogous to normal insurance arrangements. Known claims are assessed as to the value and probability of settlement. Where it is material the overall expected value of known claims taking probability of settlement into consideration is provided for in the IJB’s Balance Sheet. The likelihood of receipt of an insurance settlement to cover any claims is separately assessed and, where material, presented as either a debtor or disclosed as a contingent asset. There are no outstanding claims or any indications that any claims are to be made against the IJB. Page 85 of 120
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32 2 Critical Judgements and Estimation Uncertainty The critical judgements made in the Financial Statements relating to complex transactions are: • The partner organisations have considered their exposure to possible losses and made adequate provision where it is probable that an outflow of resources will be required, and the amount of the obligation can be measured reliably. Where it has not been possible to measure the obligation, or it is not probable in the partner organisations’ options that a transfer of economic benefits will be required, material contingent liabilities have been disclosed (there are none). • The Annual Accounts contains estimated figures that are based on assumptions made by the IJB about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. • There are no items in the IJB’s Balance Sheet at 31 March 2025 for which there is a significant risk of material adjustment in the forthcoming financial year. Provisions The IJB has not created any provisions in respect of compensation claims. It is not certain that all claims have been identified or that the historic level of settlement payments is a reliable guide for future settlements. 3 Subsequent Events In accordance with the requirements of International Accounting Standards 10, events after the reporting period are considered up to the date on which the accounts are authorised for issue. This is interpreted as the date that the accounts were certified by the Chief Financial Officer following approval by the Audit and Risk Committee. Events after the Balance Sheet date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Annual Accounts are authorised for issue. Two types of events can be identified. • Adjusting events: Those that provide evidence of conditions that existed at the end of the reporting period. The Annual Accounts is adjusted to reflect such events. • Non-adjusting events: Those that are indicative of conditions that arose after the reporting period and the Statements are not adjusted to reflect such events. Where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect. Page 86 of 120
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33 4 Expenditure and Funding Analysis Income and Expenditure 2024/25 Services specifically for Midlothian 2023/24 2024/25 £000’s £000’s Health £79,694 £83,878 Social Care £66,036 £69,483 Midlothian’s share of Lothian Health Services (Hosted) £28,884 £30,412 Midlothian’s share of Lothian Health Services (Set Aside) £24,328 £20,728 Total £198,942 £204,501 Funded by: Midlothian Council £57,416 £69,072 Funded by: NHS Lothian £129,168 £135,578 Total Funding £186,584 £204,650 Surplus/(Deficit) (£12,358) £149 Expenditure above has been split into three main areas: • Services delivered specifically for the population of Midlothian. These services are managed locally by the Midlothian Partnership – shown under Health and Social Care. • Hosted Services – these are health services managed either by the Edinburgh, East Lothian and West Lothian Partnerships or managed by NHS Lothian on a pan-Lothian basis. These services included Mental Health Services, Learning Disability Services, Substance Misuse Services, Rehabilitation services, General Dental Services, General Pharmaceutical Services and General Ophthalmic Services. This is the IJB’s agreed share of these services. • Set Aside Services – these are services delivered in the main acute hospitals (Royal Infirmary of Edinburgh, Western General Hospital and St. John’s Hospital) and managed by NHS Lothian. This is the IJB’s agreed share of these services. 5 Corporate Service Included in the above costs are the following corporate services IJB Corporate Costs 2023/24 £000’s 2024/25 £000’s Staff (Chief Officer) £56 £59 CNORIS £3 £3 Audit Fee £33 £34 Total £92 £96 As noted above, the Chief Finance Officer is not charged to the IJB. Page 87 of 120
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34 6 Related Party Transactions As partners with the IJB, both Midlothian Council and NHS Lothian are related parties and the material transactions with these bodies are disclosed in these accounts. There are elements of expenditure which are shown against the NHS Lothian above but where the resources are used by the Social Care services delivered by Midlothian Council. Transfers of resources between Health and Social Care services Funding Partner/ Resources transferred 2023/24 2024/25 £000’s £000’s NHS Lothian £132,906 £135,018 Resource Transfer (£6,928) (£6,941) Social Care Fund (£4,816) (£4,816) Other Resources transferred (£389) (£1,168) Net NHS Lothian Expenditure £120,773 £122,093 Midlothian Council £66,036 £69,483 Resource Transfer £6,928 £6,941 Social Care Fund £4,816 £4,816 Other Resources Transferred £389 £1,168 Gross Social Care Expenditure £78,169 £82,408 Both Resource Transfer and the Social Care Fund are resources which are part of the NHS Lothian budget, but these funds are used to deliver Social Care service supplied by Midlothian Council. As is noted above, the IJB is not charged for the costs of its Chief Finance Officer, nor any fees paid to its Vice Chair. The costs of the IJB’s Chief Officer are disclosed in the remuneration report and included in the charges to the IJB in section 4 above. Section 4 above shows the contributions received from each of the IJB’s funding partners and the commissioning expenditure provided to each partner. Section 5 above shows the corporate costs incurred by the IJB, these are funded by the partners and included in the expenditure analysis above. Page 88 of 120
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35 7 Short Term Debtors Owed to the IJB at 31 March 2025 2023/24 £000’s 2024/25 £000’s Funding due from NHS Lothian £381 £941 Funding due from Midlothian Council £418 £7 Total £799 £948 8 VAT The IJB is not VAT registered. The VAT treatment of expenditure in the IJB’s accounts depends on which of the Partner agencies is providing the service as these agencies are treated differently for VAT purposes. Where the Council is the provider, income and expenditure excluded any amounts related to VAT, as all VAT collected is payable to H.M. Revenue & Customs and all VAT paid is recoverable from it. The Council is not entitled to fully recover VAT paid on a very limited number of items of expenditure and for these items the cost of VAT paid is included within service expenditure to the extent that it is irrecoverable from H.M. Revenue and Customs. Where the NHS is the provider, expenditure incurred will include irrecoverable VAT as generally the NHS cannot recover VAT paid as input tax and will seek to recover its full cost as income from the Commissioning IJB. Page 89 of 120
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Midlothian IJB Audit and Risk Committee Thursday, 5th June 2025 14:00-16:00 Midlothian IJB Internal Audit Annual Assurance Report 2024/25 Executive summary The purpose of this report is to present the Internal Audit Annual Assurance Report 2024/25 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 2025. 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 2024/25 (Appendix 1), which sets out the findings and conclusions arising from all Internal Audit work for the year to 31 March 2025, consider the assurances contained therein, and provide any commentary thereon. # Item number: 5.7 MIJB – Audit & Risk Committee Thursday 5 June 2025 Item No 5.7 Page 91 of 120
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Midlothian Integration Joint Board Report Midlothian Health and Social Care Integration Joint Board Internal Audit Annual Assurance Report 2024/25 1 Purpose 1.1 The purpose of this report is to present the Internal Audit Annual Assurance Report 2024/25 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 the arrangements for governance, risk management and internal control by the MIJB of the delegated resources. 2 Recommendations 2.1 Members of the MIJB Audit and Risk Committee are asked to: Consider the MIJB Internal Audit Annual Assurance Report 2024/25 (Appendix 1), which sets out the findings and conclusions arising from all Internal Audit work carried out for the year to 31 March 2025, consider the assurances contained therein, and provide any commentary thereon. 3 Background and main report 3.1 The Midlothian Integration Joint Board (MIJB), established as a separate legal entity as required by the Act, is responsible for the strategic planning and commissioning of a wide range of integrated health and social care services across the Midlothian partnership area, based on resources which have been delegated to it by the partners, Midlothian Council and NHS Lothian. 3.2 The MIJB is therefore expected to operate under public sector good practice governance arrangements which are proportionate to its transactions and responsibilities to ensure the achievement of the objectives of Integration. The establishment of robust Risk Management and Audit arrangements is one of the key components of good governance and will be critical to the capacity of the MIJB to function effectively. 3.3 The Public Sector Internal Audit Standards (PSIAS) require the MIJB’s Chief Internal Auditor to prepare an annual report that incorporates the opinion on the adequacy and effectiveness of MIJB’s framework of governance, risk management and control, a summary of the work that supports the opinion, and a statement on conformance with the PSIAS. 3.4 The MIJB Internal Audit Annual Assurance Report 2024/25 (Appendix 1) includes the MIJB Chief Internal Auditor’s independent and objective opinion regarding the adequacy and effectiveness of governance, risk management and internal control within the MIJB to fulfil the statutory role of Internal Audit. To ensure the annual Page 92 of 120
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Midlothian Integration Joint Board reporting requirements of the Public Sector Internal Audit Standards (PSIAS) are met, the Report also includes a summary of the Internal Audit activity during the year that supports the opinion and summarises the outcome of the self-assessment of the Internal Audit service against the Public Sector Internal Audit Standards (PSIAS). 3.5 The Report provides assurances in relation to the MIJB’s corporate governance framework that is a key component in underpinning delivery of the MIJB’s strategic priorities and has been used to inform the Chief Officer’s Annual Governance Statement 2024/25. 3.6 In addition to its own governance arrangements, the MIJB places reliance on the governance arrangements adopted by NHS Lothian and Midlothian Council, the partners. Where appropriate, existing mechanisms embedded within both NHS Lothian and Midlothian Council have been used to provide assurance to the MIJB. When appropriate these reports are presented to the Audit & Governance Committee to aid the understanding of the governance arrangements in place in the partner organisations. 4 Directions 4.1 There are no Directions implications arising from this report. 5 Equalities Implications 5.1 There are no direct equalities implications arising from this report. 6 Resource Implications 6.1 There is a commitment to provide Internal Audit resource to the Midlothian Health and Social Care Integration Joint Board (MIJB) for review of the adequacy of the arrangements for risk management, governance and control by the MIJB of the delegated resources. 6.2 Internal Audit service is provided by Midlothian Council’s Internal Audit team, which has a shared service arrangement with East Lothian Council including the appointed Chief Internal Auditor (from January 2023). This is also supported by specific resource from the NHS Lothian Internal Audit team reporting to the Chief Internal Auditor. The staff who performed the MIJB Internal Audit work hold relevant professional qualifications and have the necessary experience, knowledge, skills and competencies (such as the Code of Ethics set out in the PSIAS). 6.3 The Midlothian Internal Audit Annual Plan 2024/25 approved by the MIJB Audit and Risk Committee in March 2024 was based on the assumption that Midlothian Council’s Internal Audit function provides 40 days and NHS Lothian Internal Audit team provides 30 days to support the delivery of the Plan. A summary of the Internal Audit work that was undertaken during the year that supports the annual opinion is stated in Appendix 1. Page 93 of 120
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Midlothian Integration Joint Board 7 Risk 7.1 The PSIAS require Internal Audit to evaluate the effectiveness of the MIJB’s Risk Management arrangements and contribute to improvements in the process. Key components of the audit planning process include a clear understanding of the MIJB’s functions, associated risks, and potential range and breadth of audit areas for inclusion within the Plan to provide the audit opinion. Internal Audit work carried out has been risk-based and, where appropriate, has tested the management of risk by the MIJB of the delegated resources. 7.2 Internal Audit provides assurance to MIJB Management, Audit and Risk Committee and the Board on the adequacy and effectiveness of internal controls and governance within the MIJB, including risk management, and to highlight good practice and recommend improvements. 7.3 It is anticipated that improvements in the management and mitigation of risks will arise as a direct result of MIJB Management implementing the Internal Audit recommendations. 8 Involving people 8.1 The MIJB Chief Officer, Chief Finance Officer and Integration Manager have received the MIJB Internal Audit Annual Assurance Report 2024/25 that sets out the work of Internal Audit and independent opinion on the adequacy and effectiveness of the governance, risk management and internal controls to assist them in discharging their roles and responsibilities. The MIJB Chief Officer will consider the Internal Audit findings and conclusions detailed in the above Report when completing the MIJB’s Annual Governance Statement 2024/25. 9 Background Papers 9.1 Midlothian IJB Internal Audit Annual Plan 2024/25 (approved by the MIJB Audit and Risk Committee in March 2024) AUTHOR’S NAME Duncan Stainbank DESIGNATION MIJB Chief Internal Auditor CONTACT INFO Duncan.Stainbank@midlothian.gov.uk DATE 26 May 2025 Appendices: Appendix 1: Internal Audit Annual Assurance Report 2024/25 Page 94 of 120
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Internal Audit Annual Assurance Report 2024/25 for Midlothian Health and Social Care Integration Joint Board 1 Introduction 1.1 The Public Sector Internal Audit Standards (PSIAS) (2017) requires that: “The chief audit executive [MIJB’s Chief Internal Auditor] must deliver an annual internal audit opinion and report that can be used by the organisation to inform its governance statement. The annual internal audit opinion must conclude on the overall adequacy and effectiveness of the organisation’s framework of governance, risk management and control. The annual report must incorporate: • the opinion; • a summary of the work that supports the opinion; and • a statement on conformance with the Public Sector Internal Audit Standards and the results of the quality assurance and improvement programme.” 2 Opinion on the Governance, Risk Management and Internal Control 2.1 My opinion is that the Midlothian Health and Social Care Integration Joint Board’s governance arrangements, risk management and systems of internal control are reasonable. There has been very good progress made by Management during the year with the completion of recommendations, with only 1 Internal Audit recommendation outstanding. 2.2 The MIJB operates under good public sector practice governance arrangements through its Board and Committee meetings that support scrutiny and transparency of decisions made. There is good compliance by the MIJB of the requirements of the Public Bodies (Scotland) Act 2014 and the guidance through its Directions to Partners (NHS Lothian and Midlothian Council) for the delivery of the services. The vision, strategic objectives and outcomes going forward are reflected following extensive consultation in the Strategic Plan 2022-2025, approved by the Board in April 2022 and the consultations that are currently taking place and planned for the development of the Strategic Plan 2025-2028. 2.3 The current MIJB Local Code of Corporate Governance (Local Code), which was approved by the Board on 8 April 2021, sets out the framework and key principles, which require to be complied with, to demonstrate effective governance. The Local Code complies with the CIPFA/SOLACE ‘Delivering Good Governance in Local Government Framework’ (2016) in all significant aspects. It reflects the changing context of integration and the appropriate framework for effective governance of the MIJB’s business, including its role as the strategic commissioning body i.e. setting out when responsibility lies with the Board or where reliance is placed on the arrangements in place at its Partners. Governance arrangements in place are generally sound and are being further developed. The Internal Audit high level review and assessment of the Local Code has identified aspects of governance arrangements where some improvement is required mainly to assist management of increasing financial risks. Page 95 of 120
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2.4 A Risk Management Policy, reporting regime and risk register highlighting the MIJB strategic risks, mitigating controls, residual risk and accompanying actions have been regularly reviewed, updated and reported during the year to the Audit and Risk Committee to fulfil its oversight role to monitor the IJB’s risk management arrangements. The MIJB Risk Management Policy was reviewed and a revised Risk Management Policy will be submitted to the Audit & Risk Committee in June 2024 and was approved by the MIB Board in October 2024. 2.5 The MIJB Medium term financial plan presented to the MIJB Board in October 2024 highlighted that the starting financial pressure for the 2025/26 financial year was £11.33 million with the overall financial pressure from 2025/26 to 2029/30 being £77.633 million, by February 2025 the starting pressure for 2025/26 had increased to £13.2million. In presenting a budget setting paper in March 2025 both partners had either offered or indicated increases of 11% for the 2025/26 MIJB funding leaving a £6.835million financial pressure remaining. Application of Operational and Strategic redesign recovery actions of £5.801million resulted in a remaining unbalanced budget position of £1.034 million with a reported expectation that sustainability funding for NHS Lothian would allow the setting of a balanced budget. The reliance on continued recovery plan savings and significant increases in partner budget support continues to highlight the significant financial position risks for the MIJB. Maintaining financial reporting of achievement of recovery actions, as well as overall budget position throughout the year will continue to be vital for the Board. 2.6 Further improvements in governance, risk management and internal control will be made by Management through the full implementation of the remaining one previous Internal Audit recommendation in relation to developing a more explicit link between the MIJB Medium term financial plan and the Midlothian IJB Strategic Plan. Internal Audit will continue to follow-up on their implementation and present progress reports. 3 Scope of the Internal Audit Annual Plan 2023/24 3.1 We summarise below the work we have undertaken to obtain assurances over the arrangements in place for each area considered and our conclusions on the effectiveness and appropriateness of these arrangements are listed in section 4. Local Code of Corporate Governance 3.2 In considering the delivery of integrated services, we carried out a high level review of the Local Code of Corporate Governance to assess compliance with the requirements of the following seven core principles set out in the 2016 CIPFA/SOLACE Framework: • clarity of roles and responsibilities including arrangements for the operation of Standing Orders; • behaving with integrity, demonstrating strong commitment to ethical values, and respecting the rule of law; • ensuring openness and comprehensive stakeholder engagement; • defining outcomes in terms of sustainable economic, social, and environmental benefits; • determining the interventions necessary to optimise the achievement of the intended outcomes; • developing the entity’s capacity, including the capability of its leadership and the individuals within it; and • implementing good practices in transparency, reporting, and audit to deliver effective accountability. Page 96 of 120
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Strategic Planning 3.3 In considering the delivery of integrated services we attended the MIJB meetings to observe planning, approval, monitoring and review activity of the Midlothian Health and Social Care Integration Joint Board’s business and performance. Risk Management 3.4 We carried out a high level assessment of processes for managing and monitoring risks to determine the effectiveness of arrangements for managing uncertainty over the achievement of the strategic objectives of the MIJB. Financial Management 3.5 A specific review of Recovery Plan Monitoring was undertaken in 2024/25, this was completed in partnership with NHS Lothian internal audit team resource. We reviewed the effectiveness of processes associated with the financial planning of the resources delegated to the partnership and the monitoring and reporting of financial activities in a transparent manner in accordance with best accounting practice. The key finding from this report was : While the Board receives routine financial updates and updates on recovery plans have been discussed at closed development sessions, there has to date been no further detailed reporting to the Board on the progress of the various recovery plans through the formal finance reports, which includes both the financial performance of the plan and progress against the plan’s operational/service objectives. Management should develop and present an update report as soon as possible and adhere to the agreed reporting frequency thereafter. The financial reporting has been updated to reflect this recommendation from February 2025 and the audit recommendations have now been closed with the ongoing monitoring to be maintained by the IJB Board as ongoing delivery of recovery plans remains a substantial financial risk to the MIJB. Further Annual Audit Work 3.7 Furthermore Midlothian Council’s Internal Audit resources were also deployed in undertaking the following annual audit work for the MIJB during the year: • Recommendations Follow-Up Review (Undertake two reviews. Refer to Section 5 below). • Administration of Audit Scotland Reports (Monitor publication of Audit Scotland reports and co-ordinate submission by Management of relevant Audit Scotland Reports to the MIJB Audit and Risk Committee / Board). • Audit Committee Self-Assessment (Development of templates that will assist the Chair in undertaking a self-assessment of the MIJB Audit and Risk Committee against the 2022 revised CIPFA best practice guidance and in implementing any areas of improvement in support of their development). • Attendance at Board / Committee meetings (Prepare for and attend MIJB Board / Audit and Risk Committee meetings and assisting in arranging the MIJB Board Self-evaluation). • Planning for 2025/26 (Update Audit Universe, develop and consult on coverage within the MIJB Internal Audit Annual Plan 2024/25). Page 97 of 120
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3.8 For assurance purposes, the MIJB Audit and Risk Committee was made aware of reports by other bodies that relate to the business of the MIJB including those by the Partners’ Internal Auditors, Audit Scotland and other national scrutiny and audit bodies. 4 Summary Findings and Conclusions arising from Delivery of the Internal Audit Annual Plan 2023/24 4.1 Local Code of Corporate Governance 4.1.1 The Integration Joint Board is a legal entity in its own right and as a public body it should operate under public sector good practice governance arrangements which are proportionate to its transactions and responsibilities. 4.1.2 A Local Code of Corporate Governance and Standing Orders have been approved by the Board. These documents encapsulate the public sector good practice principles and by following them the Board demonstrates sound governance arrangements. 4.1.3 We conducted a high level review of the MIJB’s updated Local Code of Corporate Governance and consider that the Governance arrangements are generally sound, although there is scope for improvement in compliance with some parts of the CIPFA/SOLACE Framework as set out in section 5 below. A review of this framework will be required during 2025/26 as a result of additional CIPFA guidance issued in May 2025. 4.1.4 The Scottish Government approved the new Midlothian Scheme of Integration scheme in May 2023. 4.1.5 The IJB has taken steps to improve governance arrangements in a number of areas: • A Self-evaluation review of the IJB Board was completed in August 2023 and refreshed in May 2025. • The Scheme of Publication has been updated in full and closed all audit recommendations in October 2024. 4.1.6 We have made no recommendations in respect of the corporate governance arrangements of the Integration Joint Board in this report. Governance and transparency is concerned with the effectiveness of scrutiny and governance arrangements, leadership and decision making, and transparent reporting of financial and performance information. Conclusion: Governance arrangements in place are generally sound and are being further developed. The Internal Audit high level review of the Local Code of Corporate Governance has identified aspects of governance arrangements where some improvement is required, although these are focused on improvements required as a result of the current financial situation. Page 98 of 120
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4.2 Internal Control and Governance – Strategic Planning 4.2.1 Our attendance at Board meetings and review of the Minutes of meetings which we did not attend continues to indicate that strong strategic leadership is in place and that the Health and Social Care partners continue to work together. 4.2.2 A Strategic Plan 2022-2025 has been developed and approved by the IJB in April 2022, which sets out the vision and values for the IJB. Community engagement was at the heart of developing the new Strategic Plan in line with good practice. However, this Strategic Plan is currently being reviewed with appropriate consultation already underway or planned for creation of a new strategic plan 2025-2028. 4.2.3 Legislation requires that the specification of what action the delivery partners are required to undertake are set out in formal instructions, referred to as Directions. MIJB Directions for 2024-25 were issued to the Chief Executives of Midlothian Council and NHS Lothian on the March 2024 and the 2025-26 MIJB Directions have also bee issued in March 2025. 4.2.5 We have made no recommendations in respect of governance arrangements in this report. Action required by Management is clearly identified, understood and ongoing. Delivering integrated services which are effective and efficient requires an agreed formal statement of the MIJB’s vision and intended outcomes and plans as well as exercising strategic leadership to deliver those outcomes. Conclusion: The MIJB is demonstrating strategic leadership by developing and clearly communicating its purpose and vision and its intended outcomes for service users. The vision, strategic objectives and outcomes are reflected in the Strategic Plan 2022-2025, although this is being reviewed to ensure greater linkage with the MIJB Five Year Financial Plan. Page 99 of 120
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4.3 Risk Management 4.3.1 Risk management is an important and integral part of good governance and a system of internal controls. It is crucial that risks to the achievement of outcomes are identified and managed. 4.3.2 The MIJB has an approved Risk Management Policy in place which sets out the risk management framework and process, roles and responsibilities, as well as monitoring arrangements. This was revised during the year and approved by the Audit & Risk Committee in June 2024 and the IJB Board in October 2024. 4.3.3 Risk management is an integral part of all activities and must be considered in all aspects of decision making. The standard template for decision-making reports to the MIJB and its Committees includes a section on implications covering risk. 4.3.5 The MIJB maintains a risk register which is reviewed regularly by the relevant risk owners, scrutinised by the MIJB Audit and Risk Committee at its quarterly meetings and reported every quarter to the Board to ensure that the MIJB is kept informed of its key risks and the actions undertaken to manage these risks. The risk register is comprehensive and responsibilities for managing individual risks are clearly allocated. 4.3.6 We have made no recommendations in respect of risk management arrangements in this report. Risk management is a process of identifying potential risks to the achievement of objectives in advance, analysing them and taking precautionary steps in order to mitigate those risks, thus managing the effect of uncertainty on objectives. Conclusion: Effective risk management processes are in place for the MIJB. Continued review of the external risks and ensuring that risks that impact on the delivery of the strategic plan are escalated as appropriate from the partner organisations. Page 100 of 120
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4.4 Financial Management 4.4.1 The MIJB Medium term financial plan presented to the MIJB Board in October 2024 highlighted that the starting financial pressure for the 2025/26 financial year was £11.33 million with the overall financial pressure from 2025/26 to 2029/30 being £77.633 million, by February 2025 the starting pressure for 2025/26 had increased to £13.2million as reported to the MIJB Board. In presenting a budget setting paper in March 2025 both partners had either offered or indicated increases of 11% for the 2025/26 MIJB funding leaving a £6.835million financial pressure remaining. Application of Operational and Strategic redesign recovery actions of £5.801million resulted in a remaining unbalanced budget position of £1.034 million with a reported expectation that sustainability funding for NHS Lothian would allow the setting of a balanced budget. The reliance on continued recovery plan savings and significant increases in partner budget support continues to highlight the significant financial position risks for the MIJB. Maintaining financial reporting of achievement of recovery actions, as well as overall budget position throughout the year will continue to be vital for the Board. 4.4.3 At the December 2021 meeting, the Audit and Risk Committee agreed to recommend to the Board the adoption of the CIPFA Financial Management Code, in so far as it applies to the operation of the IJB subject to a further report regarding how the FM Code would apply to the IJB and how assurance would be sought on it. In March 2022, it received a report which concluded that “some standards do not apply to the IJB and, of the rest, the IJB is delivering against them. That said, this analysis highlights that the development of the multi-year, balanced, financial plan is critical.” It is noted that this remains extremely challenging across all IJB’s in Scotland. 4.4.4 We reviewed the extent that the CIPFA Financial Management Code applies to the IJB, evidence suggests that the IJB fully complies with the code other than areas around demonstrating clarity on financial sustainability for the future and reliance on partners for value for money appraisals, which requires further ongoing work. The areas of the CIPFA FM code considered only partially compliant are: Part E: (The financial management style of the authority supports financial sustainability); Part I: (The authority has a rolling multi-year medium-term financial plan consistent with sustainable service plans); Part L: (The budget report includes a statement by the chief finance officer on the robustness of the estimates and a statement on the adequacy of the proposed financial reserves); Part M: (The authority uses an appropriate documented option appraisal methodology to demonstrate the value for money of its decisions); and 4.4.8 We have made no recommendations in respect of financial management arrangements in this report, although recommendations were made and subsequently implemented in the Recovery Plan Monitoring Internal Audit review and the Reserves Policy is currently under review by the Chief Financial Officer, who remains as an interim appointment although has been made a full time position during the 2024/25 financial year in response to the challenging financial position. A strong system of financial management is essential for the successful implementation of policies and the achievement of intended outcomes, as it will enforce financial discipline, strategic allocation of resources, efficient service delivery, and accountability. Page 101 of 120
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5 Recommendations Follow-Up Reviews 5.1 The Internal Audit Follow-up of Recommendations Report was presented to the MIJB Audit and Risk Committee in December 2024. Further progress has been made following this and all but one recommendation has now been implemented and this relates to more clearly linking the five year medium term financial plan with the MIJB strategic Plan remains outstanding although will be picked up in the review of the strategic plan currently being undertaken. 6 Recommendations and actions arising from Internal Audit Annual Plan 2024/25 6.1 Internal Audit provide recommendations as part of the specific reports completed throughout the year this included the Recovery Plan Monitoring Report issued to the March 2025 Audit & Risk Committee of which all the recommendations have now been implemented. 7 Public Sector Internal Audit Standards (PSIAS) 7.1 I can confirm that the 2024-25 self-assessment of practices against has indicated that Midlothian Council’s Internal Audit function conforms with the requirements of the professional standards, being Public Sector Internal Audit Standards for 2024/25 this is currently being externally reviewed by East Renfrewshire Council and a report will be shortly finalised confirming this conformance. Duncan Stainbank Bsc (Hons) CPFA MIJB Chief Internal Auditor 22 May 2025 Conclusion: Appropriate Medium term financial planning is taking place within the IJB and resources have been proved to improve this planning, however the financial position of the MIJB is extremely challenging and creating financial sustainable plans moving forward will remain challenging. Improvements have been made to the financial monitoring of Recovery plans within the 2024/25 financial year following Internal Audit recommendations, however further review will need to continue on an ongoing basis throughout the 2025/26 financial year to establish if the MIJB Budget remains balanced. The MIJB has no general reserve which increases the financial risks faced by the IJB and a new policy is being worked on in response to this challenge. Whilst the IJB does comply with the CIPFA Financial Management Code in most areas, there are a number of areas where full compliance will require further development of financially sustainable plans moving forward. Page 102 of 120
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Midlothian IJB Audit and Risk Committee Thursday, 5th June 2025, 14:00-16:00 NHS Lothian Internal Audit on Data Integrity Executive summary This report introduces the NHS Lothian Internal Audit Reports recently finalised that should be noted by the Midlothian IJB. One recent report is being brought to the attention of the Midlothian IJB Audit & Risk Committee as it provides appropriate assurance concerning relevant areas of governance. In January 2025 the NHS Lothian Audit & Risk Committee was presented with a report on Performance Data Integrity which provided a conclusion of Significant Assurance. The Midlothian IJB Audit and Risk Committee is asked to: • Note the findings of the NHS Lothian Internal Audit of Risk Management. Item number: 5.8 MIJB – Audit & Risk Committee Thursday 5 June 2025 Item No 5.8 Page 103 of 120
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Midlothian Integration Joint Board Report MIJB Reporting: NHS Lothian Internal Audit Reports for noting 1 Purpose 1.1 The purpose of this report is to inform the Midlothian IJB Audit and Risk Committee of the NHS Lothian Internal Audit Report on Performance Data Integrity providing Significant Assurance. 2 Recommendations 2.1 The MIJB Audit and Risk Committee is asked to: • Note the findings of the NHS Lothian Internal Audit on Performance Data Integrity. 3 Background 3.1 The Chief Internal Auditor continues to review audit papers for both NHS Lothian and Midlothian Council on an ongoing basis. Where Internal Audit reports may be relevant to the IJB details of these reports are brought forward to the MIJB Audit & Risk Committee to note. 3.2 In January 2025 the NHS Lothian Audit & Risk Committee was presented with a report on Performance Data Integrity which provided a conclusion of Significant Assurance. One low graded recommendation and one improvement recommendation were made and highlighted changes to the 4 hour emergency access standard being implemented from April 2025. The report provides assurance of the reliance on data integrity of performance reporting and does not cover NHS Lothian’s actual performance against national targets. Members should note that this report is an operational report in relation to NHS Lothian and the agreed actions are being resolved and monitored by NHS Lothian Audit & Risk Committee. 4 Directions 4.1 There are no Directions implications arising from this report. 5 Equalities Implications 6.1 There are no direct equalities implications arising from this report. 6 Resource Implications 6.1 There are no direct resource implications for the IJB arising from this report. Page 104 of 120
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Midlothian Integration Joint Board 7 Risk 7.1 There are no direct risk impacts as a result of this report. 8 Involving people 8.1 These reports have been through appropriate management review within NHS Lothian prior to finalisation and are presented here for noting. 9 Background Papers 9.1 There are no background papers to this report. AUTHOR’S NAME Duncan Stainbank DESIGNATION Chief Internal Auditor CONTACT INFO duncan.stainbank@midlothian.gov.uk DATE 26 May 2025 Appendices: Appendix 1: Full NHS Lothian Internal Audit Report on Performance Data Integrity (Jan 2025). Page 105 of 120
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