The Audit Committee of Scottish Borders Council met on Monday 22 June 2026 to review the council's financial performance, risk management, and governance arrangements. Key discussions included the draft annual report and accounts for 2025/26, the local government budget outlook, and the annual assurance statement to the Scottish Housing Regulator. The committee also considered the director's risk management presentation and the draft annual governance statement.

Best Value Thematic Report: Transformation

The committee received an overview of the Accounts Commission's Best Value Thematic Report on Transformation, which highlighted key messages from audits across 22 Scottish councils. The report focused on transformation planning, programme management, partnership working, community engagement, and the impact of transformation activities. A supplement provided case studies on strategic planning, financial planning, transformation funding, project plans, managing projects and programmes, councillor engagement, resourcing, partnership working, joint funding, community engagement, and impacts. The committee noted the report and its associated case studies, recommending that they be forwarded to all Scottish Borders Council councillors for their information.

Local Government Budgets 2026-27

The committee considered a bulletin from the Accounts Commission regarding Local Government Budgets for 2026/27. Key messages from the report indicated that despite a small real-terms increase in Scottish Government funding, councils face significant financial sustainability risks due to funding not keeping pace with rising demand and costs. A 15% decrease in capital funding was noted, limiting infrastructure investment and increasing reliance on borrowing. The bulletin also highlighted that councils are implementing local measures, including planned savings and the use of reserves, to achieve balanced budgets, with an average council tax increase of 7.7%. The committee recommended that the bulletin and a checklist for elected members be forwarded to all Scottish Borders Council councillors to read and complete in advance of budget-setting arrangements for 2027/28.

Director Risk Management Presentation

Mr John Currie, Director of Infrastructure and Environment, presented an overview of the risks within his directorate. He highlighted three corporate risks: major incidents, property rationalisations and savings, and capital projects delivering a return on investment, all of which were rated as low amber. He also detailed service-specific risks, including those related to emergency planning, city services, passenger transport, property services, waste services, roads and infrastructure, design and engineering, fleet management, parks and environment, and SBC contracts.

Councillor Euan Robson raised concerns about bottle bank collections, noting service problems due to contractor vehicle breakdowns. Mr Currie acknowledged that there wasn't a specific risk logged for bottle banks but confirmed that options with other suppliers were being explored. He also committed to obtaining an update on the Regen contract and exploring contractual levers with the current glass bottle bank supplier, as well as ensuring the issue was adequately covered in the risk register. Councillor Robson also inquired about the monitoring of return properties towards the 2029 deadline. Mr Currie explained that the process relies on communities coming forward with proposals, and while there is a gap in proactive engagement due to resource constraints, he welcomed feedback from members engaging with communities.

Councillor Thornton-Nicol raised concerns about IT skills gaps and the rollout of systems without adequate training. Mr Currie acknowledged this as a council-wide concern and explained that efforts were being made to address this through appraisals and skills pathways. He also noted that some training is self-directed and that the council is trying to incentivise staff to undertake training through personal development plans. Regarding in-cab technology, Mr Currie stated that the aspiration was to have it fully operational within the current financial year, with fitting to vehicles underway and a focus on ironing out quirks before wider rollout.

Jill Stacey, Chief Officer Audit and Risk, noted that Internal Audit had previously highlighted risks around depot security and that short-term actions and longer-term investment were being implemented. She also mentioned the re-establishment of the SBC Internal Risk Group to discuss insights and ensure actions were taken.

Draft Annual Report and Accounts 2025-26

Susie Douglas, Director of Finance and Procurement, presented the draft Annual Report and Accounts for 2025/26. She highlighted key council achievements, including the opening of two new high schools, a reduction in delayed hospital discharges, and a high school attendance rate. Financially, the council delivered a balanced revenue outturn for 2025/26, with a stable balance sheet position and a headline capital spend of £82.3 million. Revenue savings of £8.8 million were delivered, with 46% on a permanent recurring basis.

Councillor Robson questioned the unallocated balances and the cost of borrowing as a percentage of the revenue budget. Ms Douglas confirmed that borrowing costs were still below 10% and that the council's approach to reserves was risk-based. She expressed a desire to increase reserves for greater resilience but acknowledged the current climate made this difficult. Councillor James Anderson raised concerns about the lack of confirmed funding from the Scottish Government for employers' national insurance contributions, which had resulted in the council having to find the shortfall. Ms Douglas confirmed this was a significant risk taken during budget setting and that it had been addressed permanently in the 2026/27 financial planning. Councillor James Anderson also inquired about the conversion of temporary savings into recurring savings and their service consequences. Ms Douglas explained that some temporary savings were due to timing issues and would become permanent in the following year, while others were due to delays in delivery. She noted that 70% of savings for 2026/27 were already marked as permanent.

The committee noted the draft annual report and accounts and supported its submission for review by the external auditors, Audit Scotland.

Annual Assurance Statement 2025-26 to the Scottish Housing Regulator

Graeme Slorance, Homelessness Manager, presented the Annual Assurance Statement for 2025/26 to the Scottish Housing Regulator. He highlighted an increase in breaches of the unacceptable accommodation order, rising from 1 in 2024/25 to 39 in 2025/26, attributed to increased demand for temporary accommodation. Mitigation efforts include expanding temporary accommodation stock and improving throughput. The statement also noted the need to formalise prevention activity and ensure health and safety compliance, particularly regarding gas, electrical, asbestos, mould, damp, and fire safety in temporary accommodation. For Gypsy Traveller site provision, the statement confirmed compliance with Scottish Government minimum standards and relevant legislation, with ongoing engagement with unauthorised encampments.

Councillor Robson inquired about feedback from the Housing Regulator, and Mr Slorance confirmed that the regulator had previously attended meetings and indicated they were unlikely to attend this year, which was a positive sign. Councillor James Anderson asked for more detail on Gypsy Traveller accommodation, specifically regarding the pattern change and work being undertaken. Mr Slorance stated that a second site investigation had not progressed and offered to find further information. He also confirmed that encampments were happening in the same place annually, indicating a pattern change, and that work was needed to address this. Councillor James Anderson also questioned why a compliance group had not been in place previously. Mr Slorance explained that the group had been streamlined and realigned for efficiency.

The committee approved the Annual Assurance Statement 2025/26 to the Scottish Housing Regulator.

Draft Annual Governance Statement 2025-26

Susie Douglas, Director of Finance, presented the draft Annual Governance Statement for 2025/26. She explained that the statement details the council's governance framework, the annual review of that framework, areas for improvement, and an overall opinion. Jill Stacey, Chief Officer Audit and Risk, highlighted that new guidance from CIPFA and SOLACE had influenced the content, with increased reference to the use of technology, digital aspects, and cyber security. She also noted changes to the membership of the Governance Review Group to ensure appropriate seniority and knowledge.

The committee considered the draft Annual Governance Statement, ensuring it reflected the risk environment and governance in place to achieve objectives, and acknowledged the actions identified by management to improve internal controls and governance arrangements. They also noted that the draft statement had been included within the Council's draft Statement of Accounts 2025/26 prior to the statutory external audit process.

Other Items

The committee also noted the Minute and Action Tracker from the previous meeting, confirmed no other items were previously circulated or deemed urgent. The meeting concluded with thanks to the Director of Finance and her team for their work on the draft annual report and accounts.