Contents. Dumfries & Galloway Council Audited Annual Accounts 2014/15. Management Commentary 1

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1 D u m f r i e s A n n u al a n d G a l l o w a y A c c ount s C o u n c i l 2014/2015

2 Contents Management Commentary 1 Explanatory and Assurance Statements Statement of Responsibilities for the Statement of Accounts 12 Annual Governance Statement 13 Remuneration Report 26 Principal Financial Statements Movement in Reserves Statement 37 Comprehensive Income & Expenditure Statement 38 Balance Sheet 39 Cash Flow Statement 40 Notes to the Financial Statements Accounting Policies and Assumptions Note 1 Summary of Significant Accounting Policies 41 Note 2 Adjustments to 2013/14 Audited Annual Accounts 49 Note 3 Accounting Standards Issued and Not Yet Adopted 49 Note 4 Critical Judgements in Applying Accounting Policies 49 Note 5 Assumptions Made About the Future and Other Major Sources of Estimation Uncertainty 50 Note 6 Events After the Balance Sheet Date 50 Movements in the Reserves Statements Note 7 Adjustments between Accounting Basis and Funding Basis under Regulations 51 Note 8 Transfers to/ (from) Other Statutory Reserves 53 Comprehensive Income & Expenditure Statement Note 9 Other Operating Expenditure 53 Note 10 Financing and Investment Income & Expenditure 54 Note 11 Taxation and Non-Specific Grant Income 54 Note 12 Amounts Reported for Resource Allocation Decisions 55 Note 13 Trading Operations 57 Note 14 Agency Services 58 Note 15 External Audit Fees 58 Note 16 Grant Income 59 Balance Sheet Note 17 Property, Plant & Equipment 60 Note 18 Heritage Assets 63 Note 19 Intangible Assets 65

3 Note 20 Assets Held for Sale 66 Note 21 Capital Expenditure & Financing 67 Note 22 Inventories 68 Note 23 Long Term Debtors 68 Note 24 Short Term Debtors 69 Note 25 Cash & Cash Equivalents 69 Note 26 Short Term Creditors 70 Note 27 Short Term Liabilities 70 Note 28 Provisions 71 Note 29 Private Finance Initiatives & Similar Contracts 72 Note 30 Termination Benefits 74 Note 31 Defined Benefit Pension Schemes 75 Note 32 Pension Schemes Accounted for as Defined Contribution Schemes 79 Note 33 Dumfries & Galloway Council Pension Fund 79 Note 34 Usable Reserves 80 Note 35 Unusable Reserves 83 Note 36 Leases 86 Note 37 Financial Instruments 87 Note 38 Nature & Extent of Risks Arising from Financial Instruments 89 Cash Flow Statement Note 39 Cash Flow Operating Activities 92 Miscellaneous Notes Note 40 Related Parties 93 Note 41 Contingent Liabilities 93 Note 42 Group Accounts 94 Supplementary Financial Statements Council Tax Income Account 95 Non-Domestic Rates Account 97 Trust Funds 99 Common Good 101 Audit Certificate Independent Auditors Report 106

4 Management Commentary This Management Commentary is intended to assist readers of the annual accounts through providing an insight into the activities and priorities of the Council and also through providing an analysis of financial performance as reflected in the following financial statements. The Management commentary also provides an indication of the principal risks and uncertainties facing the Council over the upcoming period and the main measures in place to address these risks. Main Activities Dumfries and Galloway Council is one of 32 local authorities in Scotland, delivering a wide range of local services for the residents of Dumfries and Galloway such as education, social services, leisure & recreation, rubbish collection and roads maintenance. The Council employs almost 8,000 staff, covering an area of 2,481 square miles (the 3rd largest in Scotland) and serves a population of over 150,000. The Council is run by 47 councillors who are elected every five years by the residents they represent. The Council area is made up of 13 wards with either three or four Councillors in each ward. Delivering the Priorities of the Council In September 2014, the Council agreed to a new set of Priorities. The 4 Council Priorities target the most important areas of council services - improving the region economically and also ensuring better lives for our children and other vulnerable groups. These priorities are at the heart of council services and are supported by underpinning commitments. These Priorities and Commitments, and a review of progress is provided below: Build the local economy The number one priority of our Council is to build the local economy. We are committed to ensuring that Dumfries and Galloway emerges from the economic downturn in a stronger position by focusing on tackling the underlying weaknesses in our local economy - low pay, underemployment, above average levels of youth unemployment and the low level of qualifications. We want to create a 'can do' approach within our Council that ensures our services are focused on growing our economy and building the capacity of individuals and communities to support the economy. Through the refreshed Economic Strategy and new Employability and Skills policy we will:- Improve the level of skills within our communities and workforce Support our small and medium sized businesses to be established and grow Invest in our key infrastructure Provide an attractive location to do business Develop a diverse economy that creates sustainable, high wage job opportunities The focus of this priority is tackling the underlying weaknesses in our economy low pay, underemployment, above average levels of youth unemployment and the low level of skills and qualifications. They also reflect the Council s leadership role in acting as a catalyst and model for other employers and organisations across the region in terms of innovative approaches. The Regional Economic Strategy (RES) will play a significant role in driving this forward the baseline research that underpins the Strategy was published in May The RES sets out an ambitious economic vision for the region with a new Economic Leadership Group acting as a strategic oversight body. The Employability Partnership Action Plan was agreed in 2014 and has been updated to provide an 18 month Work Plan. This reflects the priorities and commitments detailed in the Partners Concordat. Partners are successfully accessing additional funds e.g. Scottish Government support for Developing Scotland s Young Workforce and European Social Fund to support and enhance delivery. The Council s Budget for 2014/15 1

5 contained Policy Development proposals around employability which directly supported the Council s commitments. The funding supported resourcing the Total Access Point, the Young Recruits Programme, Pathways to Employment, Link Workers in Schools and the Graduate Placement Programme. Provide the best start in life for all our children We're committed to giving all local children and young people an equal chance to fulfil their potential. We will provide strong early years support, affordable childcare and the best schools to ensure every child (especially those who need a helping hand) has the opportunity to succeed and achieve their potential. We will keep our children and young people safe, and listen to them and their families to make sure they get the right help at the right time. Ensure early intervention, in particular to keep our region's most vulnerable children safe Invest in creating schools fit for the 21 st century which are at the heart of our communities Raise ambition and attainment, in particular to address inequalities Support children to be healthy and active There was a follow up visit by the Care Inspectorate in early December 2014, meeting with key stakeholders to discuss progress since the Inspection of Children and Young People s services in early This provided external assurance that we are indeed making significant improvements in our processes and practices that will lead to improved outcomes for children. The Children s Services Plan was agreed in March 2015 and is focused on the next 18 months as we embed the changes from improvement in process to measurable impact. There is still a very clear focus on vulnerability with key strategic groups leading on Safety; Corporate Parenting; Early Years; and Getting it Right for Every Child (GIRFEC) implementation. Planning for key aspects of the Children and Young People s Act is also a focus with the preschool provision being of particular importance and preventative activity in terms of, for example, physical activity Protect our most vulnerable people We want our most vulnerable residents - many of whom live in poverty or suffer poor health to have the support and resources they need to live healthy and independent lives. Tackle the causes and effects of inequality and poverty Help older or vulnerable people live healthy and independent lives Ensure our older or vulnerable people receive the care and support they need Keep our communities safe Initial work on developing our Council s Anti- Poverty Strategy, informed through community and stakeholder engagement and research commissioned from the Crichton Institute, has identified a complex pattern of poverty that will require services to be tailored, additional resources and innovative approaches across a wide range of Council departments and partner organisations. The Financial Inclusion Strategy has seen key improvements across Financial Education in schools, significant improvement with the Home Energy Efficiency Programme Scotland Area Based Scheme (HEEPS-ABS) to tackle fuel poverty and improved partnership working across advice services, along with extended opening hours. Community Safety arrangements have been improved with support for the Community Safety Partnership through an Executive Group and work is ongoing to secure a national resilience facility in our region. Our Health and Social Care Integration Programme with NHS Dumfries and Galloway continues to make good progress; with other significant policies and strategy developments also being implemented including Self-directed Support. We know that there are almost 14,000 identified Carers in our region (2011 census) and that the percentage of Carers with caring responsibilities of 50 or more hours a week has increased and that we currently provide support, through the Third Sector, to around 1,800 Carers. There is therefore a need to continue to focus our efforts on increasing the number of Carers we can support, in partnership with Dumfries and Galloway Carers Centre and other partner agencies. We will monitor the progress of legislation - the Carer (Scotland) Bill - through the Scottish Parliament to ensure that we are fully prepared for its enactment and able to address any implications for Carers and future Council service planning and provision 2

6 Be an inclusive council We are passionate about the importance of working with local people, our communities, our businesses, our staff and other organisations in our region. There is no monopoly of good ideas and we all have a shared interest in making the most of the talents, vision and commitment of the people who live and work in Dumfries and Galloway. Ensure that local people and communities are at the heart of our decision making Empower our communities to make the most of their assets Increase equality of opportunity Work has been underway to develop our Council s approach to improve engagement and involvement with our communities. The Budget Development evidenced good practice in engagement and the Area Committee Community Meetings continue to be deployed across the region to assist with community engagement involving key stakeholders, the public and Elected Members on matters of local or regional interest. Satisfaction levels are currently at 93.3%. At national level, the Community Empowerment (Scotland) Bill has been making its way through the Scottish Parliamentary process and work has been ongoing to feed in our views and keep up to date with its proposals and implications. The Community Survey, first undertaken in 2013, was repeated during October November 2014 and the results have informed our Equality Outcomes and Actions. This work has seen steady progress within our Council in increasing the number of females within the top 5% of earners within Dumfries and Galloway. The performance is now 51.2% and above the target of 49%. Security and other arrangements to support the collection of sensitive information about staff (on the Protected Characteristics) are also now complete. Performance Information A comprehensive report on the Council s performance in 2014/15 across all its Priorities, including key performance measures agreed by Full Council, can be found at Shape of the Council The Council decided in June 2015 to re-shape Council services, bringing them closer together to ensure the new Council Priorities come first. A significant programme of work has been undertaken to progress this during 2014/2015, with final decisions taken in December 2014 and February 2015, as part of budget and other resource decisions. The implementation of the outcomes from this re-shape work commenced in February 2015 and involves re-grouping services to achieve better outcomes, reducing overheads and costs, and re-directing reduced service activity onto Council Priorities. As part of this the Council has decided to change its leadership and management arrangements, and reduce from six departments to four directorates as set out below. Directors were appointed to this new structure on 1 April Children, Young People and Lifelong Learning Economy Environment and Infrastructure Communities Corporate Services 3

7 The Council s is determined to protect frontline services, through this programme, and has therefore focused on service redesign and innovation to reduce activity and secure management and overhead reductions, removing structural inefficiencies. A reduction of 2million in management costs has been programmed over the three year financial plan. The programme, intended to provide better clarity in respect of roles, responsibilities and accountabilities, and develop a culture of one council, includes: Realising budget savings by creating opportunities for efficiencies through rationalisation of services and management. Implementing an organisational structure that can be sustained for at least the next 5 years, freeing up time and resource to meet the future financial challenges through innovation and frontline development. Focusing the organisation towards our customers and communities and not inwardly. Aligning service management and the governance and decision making structures of the Council. Achieving the outcomes (Priorities) members wish even with reducing finances. Commissioning focused on strategic planning mobilisation of resources to meet outcomes, and demonstrating value for money. A programme of service reviews has been established to support the delivery of this. Looking Forward The Council remains committed to continue to deliver for our communities and citizens. The Shape Programme which is now underway is providing a strong pace of change, better clarity, which staff have welcomed. It also provides a coherent programme of work to continue to deliver on the Priorities, even with the challenges local government is facing. For 2015/16 the main focus of the Council will be on the Priorities and the underpinning plans to deliver these. The four main plans or strategies that have been developed or are in development with community planning partners the Regional Economic Strategy (May 2015); the Anti Poverty Strategy (June 2015); the Childrens Services Plan (March 2015) and the forthcoming Adult Health and Social Care Strategic Plan, provide a clear focus for Council services and other public agencies in the region. The delivery of the Regional Economic Strategy demands continued efforts to deliver a positive future for our region. The work that the Council is doing around employability, with the Youth Guarantee, opportunities for graduates, and business growth all contribute to this, and the cooperation and support of a wide range of partners will be critical to that success. The new Integrated Joint Board for health and social care will be established in the autumn of 2015, and will see our management and staff working in these areas delivering lifeline services in locality teams with the NHS, Independent and Third Sector colleagues. Changes are required in Committee scrutiny arrangements to respond to this and this work is underway. The Council is focused on continuing to exercise its oversight and provide political and operational direction to ensure that the ambition of integration achieves real improvements in the lives of our most vulnerable adults. The new integrated Children s Services Plan will be developed further, building on the improvements already implemented and the clear priorities and way forward which has received a very positive response from the Inspectors. Progressing the delivery of the Schools for the Future programme will be an important aspect of the delivery of the Council s ambition for children, young people and lifelong learning. Delivering our Anti-Poverty Strategy in all services will underpin the drive to improve the lives of people in our region experiencing poverty. Our Council s accreditation as a Living Wage employer, community hubs across the region and new ways of supporting people are exciting developments that will be visible and make a difference to our communities. 4

8 Financial Strategy In February 2015 the Council agreed a Financial Strategy which includes a 3 year revenue budget covering the period 2015/16 to 2017/18 and a 10 year Capital Investment Strategy covering the period up to financial year 2024/25. 3 Year Revenue Budget Plan The 3 year budget plan provides a clear indication of the Council s policy intentions over the upcoming period and provides clear direction for both service and financial planning purposes. A key element of the budget plan is the agreement of measures required to secure estimated savings of over 32 Million required to balance the budget over the upcoming 3 financial years with a range of initiatives including an ambitious programme of thorough Service Reviews contributing to that challenging requirement. The 3 year budget plan also makes provision for investment in a range of initiatives aimed at supporting the delivery of the Council s agreed priorities and commitments including:- Taxi Card Scheme Tackling the Causes and Effects of Poverty Major Festivals and Events Strategy School Based Social Work Provision Policy Development Initiatives Economic Inclusion Programme Additional Employability Support Sustaining Care at Home Services Employment Programme Looked After Young People Financial Assistance to Small Businesses 5

9 10 Year Capital Investment Strategy The development of a 10 Year Capital Investment Strategy is a key element in allowing the Council to develop large scale investment proposals over the medium term and reflects total planned Council investment of 370 Million in a range of key initiatives which will attract significant additional external funding from Scottish Government and other contributors. The main projects being progressed include the Dalbeattie Learning Campus, the Dumfries Learning Town and significant investment in Next Generation Broadband throughout Dumfries and Galloway. Financial Review 2014/15 The Statements in the Annual Accounts The principal financial statements in the Annual Accounts are: Movement in Reserves Statement - this shows the movement in the year on the different reserves held by the authority, analysed into usable reserves (i.e. those that can be applied to fund expenditure) and unusable reserves (e.g. reserves reflecting unrealised gains on the revaluation of assets). Comprehensive Income & Expenditure Statement this statement is a summary of the resources generated and consumed by the Council in the year. Balance Sheet - this shows the value of the Council s assets and liabilities and reflects the overall financial position of the Council at the end of the financial year. Cash Flow Statement - this statement summarises the inflows and outflows of cash arising from transactions with external third parties. Notes to the Financial Statements this provides further information on the Council s financial statements. The supplementary financial statements are: Council Tax Income Account this shows the gross and net income received from Council Tax, the number of properties on which Council Tax is levied and the charge per property. Non-Domestic Rates Account this shows the gross and net income from non-domestic rates (NDR) and details the amount payable to or by the national NDR pool, and the resulting redistribution of NDR income to the Council. Trust Funds this details the income and expenditure in respect of Trust Funds which are administered by the Council in its capacity as a trustee. All trusts are registered Scottish charities. Common Good Funds this details the income and expenditure in respect of Common Good Funds which are held by the Council for the benefit of residents of former Burghs in the region. Financial Review Council spending was contained within budget in 2014/15 and the amount held in unallocated General Fund Balances at the end of the year is in line with the Council s agreed policy to seek to retain balances at a minimum of 2% of annual planned expenditure ( 6.8 Million). This reflects a positive financial performance for the Council given that Service budgets have been significantly reduced in recent years through required savings as a result of reductions in public spending. While the Comprehensive Income & Expenditure Statement on page 38 reflects a deficit for the year, it is important to recognise that this largely reflects the impact of accounting adjustments (particularly pensions accounting entries) and a more informative indication of the Council s financial performance for the year is reflected in the movement in General Fund Balances shown in the Movement in Reserves Statement on page 37. 6

10 The Council s total General Fund Balances decreased from 58.4 Million to 57.8 Million in 2014/15. The allocated/committed elements of General Fund Balances are detailed at Note 34 to these accounts and include the following amounts: Million is being held in a Sinking Fund to be used on the Smarter Schools PPP project, Strategic Waste Funding of 7.3 Million which is being held in a Sinking Fund to be used to meet future payments on the Waste Management/ Recycling PFI project, 2.7 Million is being held in a Corporate Change Fund to support the delivery of change, savings and efficiencies over the upcoming financial year, and 3.0 Million is being held to fund affordable housing projects. As indicated above, Services faced a significant challenge in 2014/15, in terms of containing spending within reduced budgets and Service Management Teams continued their approach of active budget management and tight spending controls to seek to ensure the avoidance of overspending and also to identify further efficiencies during the course of the year. The table below provides a summary outturn statement which outlines net expenditure against budget for each of the Council s Services:- Service Outturn Budget Final Outturn Variance 2014/ / Education Services 131, ,443 (130) Social Work Services 81,162 81,143 (19) Planning & Environment Services 28,437 28, DGFirst 33,265 33,218 (47) Community & Customer Services 32,159 32, Chief Executive Service 21,868 21,827 (41) Total Operational Budgets 328, , The risk of potential overspending against the Planning & Environment and Community & Customer Services budgets was identified early in the financial year and was related to pressure on income levels and challenges associated with the timing of the delivery of agreed savings measures. The early identification of these pressures allowed the relevant Service Management Teams to identify compensating measures to limit the extent of overspending and surpluses achieved against corporate budgets, including loan charges and energy costs, meant that the impact of these overspends (which were each within 1% of the relevant Service budgets) were accommodated within the overall budget for the Council. Active budget management and tight spending control ensured that all other Council Services achieved small surpluses in 2014/15. As reflected at Note 11 to these accounts, the main source of funding for the Council is through Central Government grants and a total of Million was received in 2014/15 through the Revenue Support Grant and through distributions from the National Non-Domestic Rates pool. In addition, the net Council Tax yield for the year was 55.4 Million. 7

11 Capital Programme and Borrowing Facilities Note 21 to these accounts provide summary information on capital expenditure incurred in 2014/15. Of the Council s capital expenditure of 42.4 Million, 23.0 Million was funded through capital grants, receipts from the sale of assets and other contributions leaving 19.4 Million to be funded through borrowing. The Council s capital plans are determined on a prudential basis with the level of expenditure based on an assessment of the level of investment that is considered to be prudent, affordable and sustainable. The development of the 10 year Capital Investment Strategy and the active management of the programme ensured that over 99% of the funding available was utilised in 2014/15. Major capital investment supported during the year included:- 13 Million invested in our key infrastructure including roads and bridges 6.4 Million invested in our school property estate & a further 1.5 Million invested in the development of the Dumfries Learning Town and the Dalbeattie Learning Campus 4 Million invested in our non-school property estate 4.2 Million invested in the extension of Next Generation Broadband throughout our region 2.9 Million invested in a range of Economic Development Initiatives 2.3 Million invested in our ICT and Vehicles/Fleet 8

12 Key Financial Indicators The following financial indicators are designed to assist the reader to assess the performance of the Council over the financial year. Financial Indicator Commentary Reserves Uncommitted General Fund Reserve as a proportion of Annual Budgeted Net Expenditure Reflects the level of funding available to manage financial risk/unplanned expenditure. The Council's Policy is 2% of annual expenditure which is considered appropriate in the context of the Council's financial and on-going risk profile. This is also a fundamental factor the Council's Finance Strategy 2.00% 2.00% Movement in the Uncommitted General Fund Balance Council Tax Reflects the extent to which the Council is using its uncommitted General Fund Balance. There was no use of uncommitted general balances in However, the level of balances required to be retained as uncommitted was reduced from 7.6Million to 6.8 Million in 2013/14 following the transfer of Police and Fire Services. No Change No Change In-year collection rate Financial Management Actual Outturn compared with Budgeted Expenditure Number of Invoices paid within 30 calendar days of receipt Debt/Long Term Borrowing Loans Fund Interest Rate Reflects the Council's effectiveness in collecting Council Tax debt and financial management. The Council continues to achieve high collection levels despite the current economic climate and its effect on the local economy % 96.00% How closely expenditure compares to the budget is a reflection of the effectiveness of financial management. This indicator is based on the format of budget monitoring as reported throughout the year % 99.65% Indicates how timeously the council is meeting its commitment to pay its suppliers within 30 days of receiving invoices % 89.33% Indicated the effectiveness of treasury management activities through showing the average cost of servicing the councils net debt 3.21% 3.23% Balance Sheet The Council s balance sheet (page 39) summarises the assets and liabilities of the Council. During the course of the year the Net Assets of the Council have reduced from 85.7 Million to 56.8 Million but it is important to recognise that this reduction is due specifically to an increase in the actuarially assessed value of the pensions liability which has increased by 72 Million. This increase is due to the value applied to future pensions liabilities which have increased substantially as a result of a reduction in the discount rate applied to these future liabilities (the lower the discount rate the higher the value attached to future liabilities). 9

13 There has been no impact on the General Fund arising from this increase in Pensions liabilities. Scottish Government regulations require the General Fund to be charged with the amount payable by the Council to the pension fund or to pensioners in the year, not the amount calculated according to accounting standards. Significant Trading Operations Note 13 to these accounts provides details of the performance of the Roads Maintenance Statutory Trading Operation. The statutory financial requirement for significant trading operations is to at least break even over a rolling 3 year period. As reflected at Note 13, the Roads Maintenance Statutory Trading Operation recorded a deficit of 405k in 2014/15 and now has a combined deficit of 402k over the last 3 year period and has therefore failed to meet its statutory financial target. It is important to recognise that a significant element of the deficit relates to pensions charges associated with the reduction in the discount rate applied to future pension liabilities which are largely outwith management control. However, there are measures that management are taking to address other areas where profitability of activity can be improved to ensure an improvement in trading performance going forward. Financial Outlook & Principal Risks Recent years have seen a significant reduction in public spending and it is readily apparent that this trend will continue over the upcoming period. The extent of further reductions in funding to be absorbed by Scottish local authorities remains uncertain at this stage but it is anticipated that the period up to financial year 2018/19 will be particularly challenging and the impact on Council services will be influenced by a range of factors including:- Economic growth levels and UK Government policy in terms of public spending levels Scottish Government spending priorities including the balance of spending between Health and other areas Other economic variables including pay levels, non-pay inflation and interest rates Demand for services including care for the elderly and vulnerable Specific spending pressures including the impact of the introduction of the Single Tier State Pension Scheme in 2016 which will increase national insurance contributions for both employees and employers and the increase in costs associated with new waste legislation. In addition to the above, the Council will continue to monitor the potential implications of upcoming changes to the local government landscape including the prospect of revised fiscal powers for Scotland following the Smith Commission. Plans to Address Principal Risks The 3 Year Revenue Budget Plan and Indicative 10 Year Capital Investment Strategy provide a sound basis from which the Council can address the key risks referred to above. However, it is essential that the Council s financial strategies remain flexible to be able to adjust to, and accommodate, variances from existing assumptions in relation to the key issues identified above. Each of these key issues will be closely monitored and the Financial Strategy will be continually reviewed and updated. The Revenue Budget Plan and the Capital Investment Strategy are supported by underlying plans including the Treasury Management Strategy and Prudential Indicators which clearly set out the Council s borrowing and investment arrangements and guidelines for the day to day management of its cash flow activities within appropriate policies and procedures. Each service within the Council also produces a Business Plan that is refreshed each year. The Business plans can be found on the Council Website. The plans provide information on the Service, its priorities, budget, staffing, risk register and performance monitoring. 10

14 Workforce Strategy The Council approved an updated 5 year Workforce Strategy covering the period in April 2015 and a programme to deliver this Strategy as the Council s approach for improving the longer term deployment and retraining of our workforce. Under the title DG Transform, there are 4 main themes within the Strategy which were developed through benchmarking of best practice in Workforce Strategy and Workforce Planning processes across Scottish Councils, as follows: Planning effectively for our Council s future workforce needs Improving employee engagement Helping our employees to succeed Ensuring equality for all Carbon Management Plan 2 (CMP2) The Council's revised Carbon Management Plan was approved in January It outlines the strategy, systems and projects designed to coordinate the sustainable achievement of carbon emission reduction targets set through legislation. Alongside the targets reflected in this plan, the Council has also agreed a range of energy efficiency measures in its 3 year budget plans including investment in Renewable Technologies including Solar Photovoltaic, Biomass, Wind Turbines and Micro-Hydro as approved by the Policy & Resources Committee on 17 January 2012 and making use of Feed in Tariff (FIT) and Renewable Heat Incentive (RHI) payments to fund activity. Pension Fund Annual Report & Accounts Dumfries & Galloway Council is the administering authority for the Dumfries & Galloway Council Pension Fund and produces a separate Pension Fund Annual Report & Accounts. These are available on the Council s website. Acknowledgements We would like to thank elected Members and colleagues for their assistance and support throughout the year in maintaining and promoting a sound financial management and control framework. We would also like to thank all those staff whose efforts have contributed to the preparation of these accounts. Ronnie Nicholson Gavin Stevenson Paul Garrett Leader Chief Executive Head of Finance 24 September

15 Statement of Responsibilities for the Statement of Accounts The Authority s Responsibilities The Authority is required to: make arrangements for the proper administration of its financial affairs and to secure that one of its officers has the responsibility for the administration of those affairs. In this authority, that officer is the Head of Finance, manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets, approve the Statement of Accounts. The Chief Financial Officer s Responsibilities The Head of Finance is responsible for the preparation of the authority s statement of accounts in accordance with proper practices as set out in the CIPFA/ LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the Code). In preparing this statement of accounts, the Head of Finance has: selected suitable accounting policies and applied them consistently, made judgements and estimates that were reasonable and prudent, complied with the local authority Code. The Head of Finance has also: kept proper accounting records which were up to date, taken reasonable steps for the prevention and detection of fraud and other irregularities. The Statement of Accounts provides a true and fair view of the financial position of the Authority at the reporting date and of its income and expenditure for the year ended 31 March Paul Garrett Head of Finance 24 September

16 Annual Governance Statement Dumfries & Galloway Council Audited Annual Accounts 2014/15 1. Scope of Responsibility 1.1 Dumfries & Galloway Council is responsible for ensuring that its business is conducted in accordance with the law and proper standards, and that public money is safeguarded and accounted for properly. The Council also has a statutory duty of Best Value under the Local Government in Scotland Act 2003 to make arrangements to secure continuous improvement in performance, while maintaining an appropriate balance between quality and cost; and in making those arrangements and securing that balance, to have regard to economy, efficiency, effectiveness and equalities and to contribute to the achievement of sustainable development. 1.2 In discharging this overall responsibility, Dumfries and Galloway Council is responsible for putting in place proper arrangements for the governance of the Council s affairs and facilitating the effective exercise of its functions. Good governance is about exercising strategic leadership by developing and clearly communicating the authority s purpose, vision and its intended outcomes for citizens and service users. 1.3 This includes setting the strategic direction, vision, culture and values of the Council; the effective operation of corporate systems, processes and internal controls; engaging with and leading the community, monitoring whether strategic priorities and outcomes have been achieved; ensuring that services are delivered cost-effectively; maintaining appropriate arrangements for the management of risk and ensuring that the Council complies with the requirements on the Role of the Chief Financial Officer in Local Government, contained in the Chartered Institute of Public Finance and Accountancy s (CIPFA s) 2010 Statement, and the Local Authority Accounts (Scotland) Regulations The Purpose of the Governance Framework 2.1 The governance framework comprises the systems and processes, culture and values which direct and control Dumfries and Galloway Council s activities and through which the Council accounts to, engages with and leads the community. It enables the Council to monitor achievement of the vision and principles set out in the Single Outcome Agreement for and the Council s 4 priorities. 2.2 The Council has a Local Code of Corporate Governance which is regularly updated and which is consistent with the principles and recommendations of the CIPFA/SOLACE (Society of Local Authority Chief Executives) Framework Delivering Good Governance in Local Government and the supporting Guidance Note for Scottish Authorities. A copy of the Code can be downloaded at The Code evidences the Council s commitment to achieving good governance and demonstrates how it complies with the governance standards recommended by CIPFA. 3. The Governance Framework The governance framework has been in place at Dumfries and Galloway Council for the year ended 31 March 2015 and up to the date of approval of the Annual Accounts. The Council s governance arrangements are consistent with the CIPFA/SOLACE good practice guidance and are detailed below: 3.1 Identifying and Communicating the Authority s Vision of its Purpose and Intended Outcomes for Citizens and Service Users At the meeting of Dumfries and Galloway Council on Thursday 25 September 2014, Councillors agreed to a new set of Priorities. The four Council Priorities target the most important areas of council services; on improving the region economically and also ensuring better lives for our children and other vulnerable groups. Our Council's priorities are: o Build the local economy o Provide the best start in life for all our children 13

17 o o Protect our most vulnerable people Be an inclusive council The Council is a key partner in the region s Community Planning Partnership Board - the Dumfries and Galloway Strategic Partnership which agreed the region's Dumfries and Galloway Single Outcome Agreement (SOA) This is the main partnership planning document for the region. The SOA is on the council website and promoted to partners and staff and posters of SOA objectives and indicators are distributed to partners. 3.2 Reviewing the Authority s Vision and its Implications for the Authority s Governance Arrangements In June 2014 the Council received a progress report in delivering its Priorities and Commitments. The report also provided members with the Chief Executive s summary look forward at the issues facing the Council over the coming years. Arising from this report, members agreed to review the Priorities and Commitments of the Council as well as remitting the Chief Executive to develop detailed proposals for revised organisational arrangements and to deliver a programme of change. 3.3 Translating the Vision into Objectives for the Authority and its Partnerships The Council s Performance Management Framework provides for six high level Business Plans that set out what the Council is planning to achieve in the coming three years; and there are annual reports on the achievement of these objectives. Each business Plan details how the service is contributing to the Council s priorities, service objectives, resources (including staff and assets) that will be applied to achieve these objectives, improvement actions and key performance indicators. Performance Reports are presented to Service/Area Committee providing an update on performance for the services including key performance indicators, measures progress and milestones. The Council progresses its business through the Scheme of Delegation to Corporate, Strategic Service and Area Committees with key roles provided by the following Committees: Policy and Resources Committee develops and approves corporate policy and strategies to further the Council s Corporate Priorities and the Single Outcome Agreement in partnership with other public bodies, voluntary and private organisations, communities and the public ensures the effective use, including shared services development, of the Council s financial and non- financial resources, including people, property (asset management planning) and technology, to further the Council s Priorities Community and Customer Services Committee develops and oversees the strategic development and management of Community and Customer services including Cultural Services; Leisure and Sport; Community Learning and Development; Revenues and Benefits and the Contact Centre receives reports on Environmental and Trading Standards and Community Safety issues including strategic oversight of the Council s priorities in relation to maintaining the safety and security of the region including the development of policy, strategy and priorities in Civil Contingency and Emergency Planning and management of the Council s role in major emergencies. 14

18 Scrutiny and Performance Committee scrutinises the performance of the Council in relation to its policy objectives, priorities and performance targets on individual service areas ensures that Best Value is achieved in the decision making process, through the impact of decisions on policy and in service delivery considers external inspections and value for money reports and their application, including value for money audits on funding of external bodies makes recommendations to the Council arising from the outcome of the Scrutiny process Audit and Risk Management Committee independent assurance of the adequacy of the risk management framework and the associated control environment within the Council to provide reasonable assurance of effective and efficient operations and compliance with laws and regulations. to review the activities of the Internal Audit function, including its annual work programme and progress against the programme and the outcome of major findings of Internal Audit investigations. to review all matters relating to external audit, including audit plan, action points and reports, and to monitor implementation of external audit recommendations. role in development of the Council s Code of Corporate Governance and Annual Governance Statement in advance of it being submitted for approval to Policy and Resources Committee. provision of an independent assurance on the integrity of financial reporting and annual governance processes. In the community context, the Council also progresses its business through both daytime Committees and themed evening Community Area Committees. The Council facilitates the Community Planning arrangements and there is a clear remit for the Strategic Partnership which involves a range of stakeholders. 3.4 Measuring the Quality of Services for Users, Ensuring they are delivered in Accordance with the Authority s Objectives and Ensuring that they represent the Best Use of Resources and Value for Money A key function of the Scrutiny & Performance Committee is to scrutinise the performance of the Council to ensure Services secure value for money and the best use of resources. The Council agreed a new Scrutiny handbook in 2012 which provides information and guidance on the operating principles and techniques of the Committee. Integral to the Scrutiny & Performance Committee work programme is a series of reviews which the Committee determined and are conducting, focusing on the effective and efficient arrangements and to identify areas of good practice. A key review this year has been Procurement and outcomes from that review have been reported to Full Council in The Council has developed a Planning and Performance Framework that enables managers, staff, members of the public, Elected Members and all stakeholders to see how it is performing, and make comparisons with its historic performance and that of other councils. This framework also allows for a consistent approach to the way service performance and quality is managed, monitored, reviewed and reported ensuring the Council is honest in evaluation of its performance, ensuring that it learns from its results and improves what it does. This Framework together with the Business Planning guidance allows the Council to focus consistently on performance across all Services and acts as a tool to strengthen the culture of the organisation. A range of benchmarking and qualitative comparison is carried out in individual Services, through professional organisations, national groups and dedicated quality and benchmarking organisations. This activity is encouraged and Services use this information to assess their performance, in terms of both cost and quality. This information is used to inform action on Service improvement. 15

19 The Accounts Commission now require councils to provide full coverage of the Local Government Benchmarking Framework (LGBF) data (SPI 3) within their public performance reporting arrangements, and this information is now available on the Council s website. The core purpose of LGBF is for councils to work together to improve their use of performance information to keep improving their understanding of why councils vary in terms of what they achieve for their communities and how good service practices can be better shared across all councils. Dumfries and Galloway Council is involved in the LGBF family group benchmarking process which was introduced to promote dialogue between Councils on where good practice lies and to share it across councils. In doing so, the intention is to better understand factors that each council can control in improving its costs against its performance achievements. Appropriate staff members from the relevant services are participating in these activities. Service Review Our Council is facing unprecedented reductions in its financial resources, with year on year reductions on revenue budgets and increasing needs and demand for services. To be able to address the challenge this presents, as part of the Council s budget development strategy 12 reviews of service provision will be undertaken over the next 3 financial years and a number of other savings options are being pursued. A Service Review Toolkit has been prepared to assist elected members and officers in meeting this challenge. The Council s commitment to continuous improvement including the adoption of the Public Service Improvement Framework (PSIF) demonstrates the belief that it needs to be more aware of its strengths and weaknesses and more proactive about identifying improvement opportunities. The Council uses PSIF, benchmarking and service review with peers to ensure objectivity in evaluation of its performance. We have introduced senior led challenge panels to challenge the findings of self-assessments to ensure that improvement actions are robust and addressing areas of improvement 3.5 Defining and Documenting the Roles and Responsibilities of the Executive, Non-Executive, Scrutiny and Officer Functions, with Clear Delegation Arrangements and Protocols for Effective Communication in respect of the Authority and Partnership Arrangements The Council has in place comprehensive Schemes of Delegation for Officers and Members which clearly define their respective roles. The Council s Member Officer Protocol (MOP) serves to guide relationships between Members and Officers and lays out the arrangements for Member involvement in a range of activities including local issues. The MOP incorporates a Media Protocol which embraces the Code of Recommended Practice on Local Authority publicity. The Media Protocol serves to increase public awareness of the Council and to improve accountability to local people. Service Committees and the Scrutiny and Performance Committee have a clear remit to scrutinise the performance of the Council in relation to its policy objectives, priorities and performance targets on individual service areas and also to ensure that Best Value is achieved in the decision making process, through the impact of decisions on policy and in service delivery. The Council is committed to partnership working and has in place relevant joint strategies and action plans which are agreed by appropriate Committees. The final draft Health and Social Care Integration Scheme for this region was agreed and adopted by Full Council on 26 March This followed consideration of the draft Scheme by the Social Work Sub Committee and the NHS Board Sub Committee meeting as the Community Health and Social Care Partnership Board (Interim Integration Joint Board). The draft Scheme provides details about the duties and responsibilities of the Council and the 16

20 NHS as both move towards the establishment of an IJB for this region. It also describes what the IJB will do to deliver local health and social care services. The draft Scheme was prepared in accordance with legal regulations and guidance. The Scheme provides for financial assurance that the budgets for the shadow year are sufficient to deliver the agreed delegated functions and level of service, and also provides how an Integrated Budget based on the Strategic Plan will be developed in future years. The Council and the NHS will establish a Performance Management Framework focused on the delivery of outcomes. The Joint Board will receive regular performance reports. The Chief Officer will report to the Chief Executive of the Council and the NHS and those three officers will hold joint performance review meetings on a regular basis. 3.6 Developing, Communicating and Embedding Codes of Conduct, Defining the Standards of Behaviour for Members and Staff Dumfries and Galloway Council has adopted the National Code of Conduct for Employees (with amendments) as its Local Code. The Code sets out the minimum standards of conduct expected of Council employees. It incorporates 'The seven Principles of Public Life' identified by the Nolan Committee on Standards in Public Life and adapted for a local government context. The Council has adopted the Standards Commission s Code of Conduct for Elected Members. Each Member undertook to meet the requirements of this Code as part of their declaration of acceptance of office. The Member Officer Protocol serves to guide Members and Officers of the Council in their relations with one another and reflects the principles underlying the respective Codes of Conduct which apply to Members and Officers. 3.7 Reviewing the Effectiveness of the Authority s Decision-Making Framework, including Delegation Arrangements, Decision Making in Partnerships and Robustness of Data Quality The Council has continued to enhance and strengthen its decision-making framework through its Ad Hoc Sub Committee Review of Schemes which considers the various aspects of the Scheme of Administration and Delegation to Committees, the Scheme of Delegation to Officers and the Scheme of Appointment to Outside Bodies and reported its recommendations to the full Council in December Further work on delegations to Members and Officers will be progressed in In light of the Council s reshaping programme of change, arrangements are in place to review decision making arrangements with a view to closer alignment between management and political structures. The findings of this work will be considered by the Ad Hoc Sub Committee Review of Schemes in September Each committee report is subject to governance checks which cover legal implications, financial and equality considerations and also the adequacy of information and data provided to enable elected members to come to a decision. 3.8 Reviewing the Effectiveness of the Framework for Identifying and Managing Risks and Demonstrating Clear Accountability The Audit and Risk Management Committee has a remit for the independent assurance of the adequacy of the risk management framework and the associated control environment within the Council to provide reasonable assurance of effective and efficient operations and compliance with laws and regulations. The remit of the Committee was updated during the year to bring it into line with revised guidance published by CIPFA on the role and 17