Orkney & Shetland Valuation Joint Board

Annual Accounts 2025/26

IMAGE: Cover of the annual accounts, with the words “Unaudited Annual Accounts 2025/26” and “Orkney & Shetland Valuation Joint Board” beside a map showing Orkney and Shetland.

Contents

1. Management Commentary
2. Annual Governance Statement
3. Remuneration Report
4. Statement of Responsibilities for the Annual Accounts
5. Primary Financial Statements
6. Comprehensive Income and Expenditure Statement for the year ended 31 March 2026
7. Movement in Reserves Statement
8. Balance Sheet as at 31 March 2026
9. Notes to the Financial Statements
10. Note 1: Expenditure and funding analysis
11. Note 2: Accounting Standards issued but not yet adopted
12. Note 3: Critical judgements in applying accounting policies
13. Note 4: Assumptions made about the future and other major sources of estimation uncertainty
14. Note 5: Adjustments between Accounting Basis and Funding Basis under regulations
15. Note 6: Specific Grant Income
16. Note 7: Short-term Debtors
17. Note 8: Short-term Creditors
18. Note 9: Unusable Reserves
19. Note 10: Nature and Extent of Risks Arising from Financial Instruments
20. Note 11: Events after the Reporting Period
21. Note 12: External Audit costs
22. Note 13: Related Parties
23. Note 14: Right of Use Asset Lease
24. Note 15: Defined Benefit Pension Schemes
25. Note 16: Accounting Policies

Management Commentary

The purpose of the Management Commentary

The purpose of the Management Commentary is to help all users of the accounts to assess how the Orkney & Shetland Valuation Joint Board (“the Board”) has performed during 2025/26 and understand the year-end financial position as at 31 March 2026. In addition, it provides a narrative on the financial outlook for the Board during financial year 2026/27 and beyond.

Introduction

The Board exists for the discharge of statutory functions relating to the preparation, publication and maintenance of both the Valuation Roll and Council Tax List (Valuation List).

The role of the Assessor and Electoral Registration Officer is to undertake the duties of Assessor and to provide the electoral registration function on behalf of both island areas.

All three documents (Valuation Roll, Valuation List and Electoral Register) are available for public inspection at the Assessor's offices, at the public libraries and offices of the two constituent authorities. In addition, a searchable online facility for the Valuation Roll and Council Tax List is available here:

https://www.saa.gov.uk/orkneyandshetland/

Amendments to the Electoral Register can be processed online at:

http://gov.uk/register-to-vote

There are 14 Assessors in Scotland, of which four are appointed directly by a single Council and the remaining 10 are appointed by Valuation Joint Boards comprising elected members from two or more Councils. Where a Valuation Joint Board exists, as in Orkney and Shetland, the duties, powers and responsibilities of the constituent Councils as Valuation Authorities are delegated to the Board. An Assessor is responsible for the valuation of both domestic and non-domestic properties within one or more Council areas.

Each board appoints an independent Assessor to ensure that valuations are free from political influence or interference. This is essential to the performance of the Assessor's statutory duties, which can involve situations where the interests of the local authority and the ratepayer may conflict.

Composition of the Board

The Board is a separate public body from the two constituent authorities, being Orkney Islands Council and Shetland Islands Council and draws its membership from them, each nominating five Councillors to serve on the Board. Board members are as follows:

Members

Orkney Islands Council

• Stephen G Clackson (Depute Convenor of the Board)
• Lindsay Hall
• Kristopher D Leask
• John A R Scott
• Jean E Stevenson

Shetland Islands Council

• Stephen Leask (Convener of the Board)
• Allison Duncan
• Liz Peterson
• Gary Robinson
• Arwed Wenger

Substitute Members

Orkney Islands Council

• James R Moar
• Gillian Skuse

Shetland Islands Council

• Moraig Lyall
• Andrea Manson
• Neil Pearson
• Bryan Peterson

Senior Management Team

Copies of board papers and minutes (from September 2020) are available on OIC’s website: Orkney and Shetland Valuation Joint Board – Minutes, Agendas and Papers. Older minutes can be found at:

www.orkney-shetland-vjb.co.uk

Assessor and Electoral Registration Officer: Robert Eunson MLE MRICS

Depute Assessor: Timothy Johnson MRICS

Depute Electoral Registration Officer: Ian Leslie AEA (Cert – Scotland)

The following appointed office bearers of the Board are employed on a substantive basis by Orkney Islands Council:

Treasurer: Erik Knight FCCA

Clerk: Gavin Mitchell, from 16 March 2025

Background

The functions of the Assessor are different from those of most other Local Government Officers, whose duties are to carry out the policies of local authorities, as determined by elected Councillors. The Assessor is required to balance the interests of individual ratepayers against those of others in terms of valuation levels.

The independence of the Assessor is necessary to ensure that decisions are made on considerations of value, without political pressure. The actions of the Assessor are subject to scrutiny however, through an appeals process.

Further details can be found here:

The Assessor – Scottish Assessors

Strategy

Service Plan

The Board has a three-year service plan covering financial years 2023 to 2026. The Service Plan can be found at:

OSVJB Service Plan 2023-26 - 2025 Approved.pdf

It sets out the Board’s vision as follows:

“To provide a range of valuation and electoral services to the stakeholders of the Valuation Joint Board in accordance with statute and at levels of excellence which meet or exceed their expectations.”

IMAGE: A speech-bubble graphic displaying the Board’s vision: “To provide a range of valuation and electoral services to the stakeholders of the Valuation Joint Board in accordance with statute and at levels of excellence which meet or exceed their expectations.”

Eleven core strategic aims and objectives have been identified in the service plan, as follows:

• Ensuring services are delivered in accordance with all statutory requirements
• Planning service development and delivery in accordance with the principles of Best Value and continuous improvement
• Reacting innovatively to change
• Striving for continuous improvement in all aspects of service delivery
• Encouraging innovation and recognise achievement within the organisation
• Consulting our stakeholders and listening and responding to their views
• Valuing staff and providing them with opportunities to develop and contribute
• Monitoring and reporting performance levels to stakeholders (Progress Report and Risk Register, KPIs)
• Integrating equalities issues into all aspects of our service provision
• Using language which is easy to understand
• Working with our partners in the Scottish Assessors' Association to ensure transparency and Scotland-wide consistency of approach to service delivery

IMAGE: An infographic presenting the Board’s eleven core strategic aims and objectives in eleven blue boxes.

The Board’s senior management team monitors the plan. Any review or update to the plan is reported to the Board through the 6-monthly Best Value progress report.

The eleven core strategic objectives are always at the forefront of planned activities. While recognising the duty to secure the Best Value, the focus has been on maintaining a core service within statutory requirements, sound governance and supporting employees throughout the period of remote working.

Performance Information

2025/26 was a challenging year for the Board with employees continuing to deal with Non-Domestic Proposals for the first time ahead of the statutory disposal date of 30 September 2025. Under Barclay reforms, the former appeal process has been modified so that an initial Proposal stage has been dealt with before a ratepayer can appeal their Valuation Roll entry.

The annual audit of self-catering entries to confirm their status on the Valuation Roll continues to be a burden and takes far more resources than was envisaged (see KPI section, below) without funding to match.

On the positive side, staffing has been more stable, with recent recruits settling in well and proving their value to the team. This was vitally important, as the year concluded with completion of the 2026 non-domestic Valuation Roll, and with it, conclusion of the first full cycle of 3-yearly revaluations. The last 3 years has been a significant learning curve, and while staff have coped admirably, it shows the continual pressure of work in the post-Barclay world of non-domestic rating.

The electoral side was also busy with preparations for the 2026 Scottish Parliamentary Election forming a significant part of the work at the end of the year. Staff coped extremely well with this busy and challenging period. The annual electoral canvass was carried out as usual.

Individual Electoral Registration (IER) continues to be a demand on resources. Funding from the Cabinet Office was last received in 2019/20, however with the introduction of Canvass reform in 2020 no further IER Cabinet Office funding is available.

Work on the rolling programme to update and revalue subjects contained in the asset register, along with insurance valuations on behalf of Orkney Islands Council, continues to be an extra service provided by the Board.

While this service is funded, the impact on the statutory functions of the Board is continually monitored. There has been no adverse impact on existing resources in provision of this valuation service.

As at 31 March 2026, the Board had:

• Entries in Valuation Roll: 5,031
  • Shetland: 47%
  • Orkney: 53%
• Electors: 35,556
  • Shetland: 50%
  • Orkney: 50%
• Rateable Value: £104,250,275
  • Shetland: 67%
  • Orkney: 33%
• Council Tax Properties: 24,337

IMAGE: Infographic showing 5,031 entries in the Valuation Roll, divided between Shetland at 47% and Orkney at 53%; 35,556 electors divided equally between Shetland and Orkney; rateable value of £104,250,275 divided between Shetland at 67% and Orkney at 33%; and council tax properties by bands A to G & H for Shetland and Orkney.

Key Performance Indicators

The Board has adopted an agreed range of local non-financial Key Performance Indicators (KPIs) with reference to those published by other VJBs. Performance targets are set annually by the Assessor with consideration of previous achievements, pressures on resources and anticipated workload.

The non-financial KPIs are:

Council Tax List

Valuation Roll

The non-financial targets were reviewed in June 2024.

Continuing a trend which started in previous years, KPIs for the Valuation Roll are well behind target. This is due to a combination of factors, i.e. self-catering audit taking staff away from other duties, dealing with proposals, and carrying out draft and final revaluations – in short, this performance is essentially the new reality in 3-yearly revaluation cycles.

In Council Tax, performance has improved markedly, with this mainly due to much lower number of self-catering audit failures (which always happen 12+ months after re-entry date in the Valuation List). There has also been a lower number of genuine new entries into the List, which helps with workload. There is positive news in that the Valuation team has been stable for a period, which should help performance going forward.

Financial KPIs

The comparison of the actual outturn to budgeted net expenditure is a measure of the effectiveness of financial management. Quarterly revenue monitoring reports inform this key financial indicator of the Board’s performance over the financial year and of the affordability of its ongoing commitments. The Financial Performance section on the following page contains further information.

The performance targets and outcomes for 2026/27 were considered by the Board on 23 June 2026.

Risks and Uncertainties

The maintenance of a risk register ensures the Board’s functions operate effectively under all assessable and identifiable risks. The risk register assesses the likelihood and impact of identifiable risks and provides actions to mitigate or minimise them. A traffic light system is used to show the overall risk rating — green being low risk, amber medium and red high.

Progress against actions are regularly monitored, and the latest report was presented to the Board on 27 November 2025. The risk register identified a total of 70 risks and of these none of the residual risks are red, seven are amber and the remainder are green.

The Board’s risks and uncertainties can be summarised as:

• Staffing – in relation to the loss of key members of staff and/or an inability to recruit or retain staff to support the valuation functions of the Board.
• Staffing – an inability to appoint sufficient staff to deliver an electoral registration function.
• Finance – unexpected expenditure leading to cash flow problems.
• Failure to maintain an up to date Electoral register, through late or non-delivery of household enquiry forms and/or invitations to register.

Since the most recent presentation of the risk register in November 2025, the Board has faced no further risks and uncertainties that have not yet been reported.

Primary Financial Statements

The accounting framework defines local authorities as Councils constituted under Section 2 of the Local Government (Scotland) Act 1994 and the Valuation Joint Boards (Scotland) Order 1995 and those bodies to which Section 106(1) of the Local Government (Scotland) Act 1973 applies (i.e. committees, joint committees and joint boards, the members of which are appointed by local authorities and charities, etc.).

The Annual Accounts summarise the Board’s transactions for the year and its year-end position at 31 March 2026. The Annual Accounts are prepared in accordance with the International Accounting Standards Board Framework for the Preparation and Presentation of Financial Statements as interpreted by the Code of Practice on Local Authority Accounting in the United Kingdom (the Code).

A description of the purpose of the Primary Financial Statements has been included immediately prior to each statement: the Comprehensive Income and Expenditure Statement (CIES), Movement in Reserves Statement and Balance Sheet. These three statements are accompanied by Notes to the Accounts, which set out the Accounting Policies adopted by the Board and provide more detailed analysis of the figures disclosed on the face of the Primary Financial Statements.

There is no Cashflow Statement because the Board does not have a bank account. All transactions are accounted for through Orkney Islands Council as administering authority.

The Primary Financial Statements and notes to the accounts, including the accounting policies, form the relevant Annual Accounts for the purpose of the auditor’s report.

Financial Performance

The purpose of the Annual Accounts is to present a public statement on the stewardship of funds for the benefit of both members of the Board and the public. The Board meets quarterly, with its budget meeting taking place in February or March. A proposed budget is presented to the Board annually and takes account of any known commitments and costs pressures. This is viewed within the context of the available resources of the constituent authorities before the Board approves the budget for the year.

The Board’s budget is its prime annual planning document, and actual expenditure is monitored against it during the year. Any underspend or overspend of budget is reported to the Board in the quarterly revenue monitoring reports and annual requisitions are adjusted accordingly.

The 2025/26 budget was approved by the Board on 27 March 2025 and has been funded by the two constituent authorities.

The Comprehensive Income and Expenditure Statement (CIES) presents the full economic cost of providing the Board’s services in 2025/26. This differs from the budgeted outturn position shown in the following table as the CIES includes accounting adjustments required to comply with proper accounting practice. The difference between the CIES and the actual outturn position is purely as a result of necessary accounting adjustments in the former.

The Cost of Services of £1,033k (£942 in 2024/25), which is disclosed on the CIES, has been reconciled to the outturn used for management decision making of £1,120k (£986k in 2024/25), within Note 1: Expenditure and Funding Analysis.

Expenditure (net of income from fees and charges) that is funded from Orkney and Shetland Islands Councils and the Cabinet Office in 2025/26 is summarised in the following table:

In 2025/26, the Board underspent against its budget. An underspend on employee costs for the year was due in part to a vacancy within the team. However, operating costs were overspent partially as a result of consultancy still being required during the start of the year.

The Balance Sheet as at 31 March 2026

The Balance Sheet sets out the total net worth of the Board at a snapshot in time. When comparing the net worth of the Board at 31 March 2026 to that of the prior year, an overall increase in the net liabilities of the organisation of £12k (£178k decrease in 2024/25) can be seen.

This has been driven by an increase in pension liabilities that represent a long-term commitment for the Board and do not require to be met in any single year. The decrease results from updated pension assumptions which interact in complex ways. For example, an increase in the net discount rate has the effect of decreasing pension liabilities, as a lower value is placed on benefits paid in the future. Changes in these assumptions are further discussed in Note 15: Defined Benefit Pension Schemes.

Material Transactions

Pension Liability/Asset

In order to comply with International Accounting Standard (IAS) 19 - Employee Benefits, a valuation of the Shetland Islands Council Pension Fund was made by the Fund Actuary as at 31 March 2026. This indicated a net pension liability for the Board of £138k compared to a net pension liability of £176k as at 31 March 2025. The movement in the year is influenced by actuarial assumptions and changes which have acted to decrease the liability in the valuation as at 31 March 2026.

The pension fund is a long-term commitment and is subject to a triennial actuarial valuation; the last valuation at 31 March 2023 recorded a funding level of 120% and determined that the contributions the Board makes to the pension fund should decrease in line with the actuary’s valuation and recommendations.

Given the net pension liability is an actuarial estimation, i.e. an attempt to look into the future, which is dependent on complex judgements, its value is subject to a high degree of uncertainty. The actual results could therefore be materially different from estimates however, such effects can be measured. The effects of changes of assumptions are further discussed in Note 15: Defined Benefit Pension Schemes.

Detailed information on the Shetland Islands Council Pension Fund can be found here:

http://www.shetland.gov.uk/about_finances/

Looking Ahead

2026/27 Budget

Looking forward, the Board approved its 2026/27 budget on 10 March 2026. The approved budget has been set at £1,196k, which is an increase of £53.4k (4.7%) on the 2024/25 revised budget and principally included an allowance for the pay award and for increases in employers’ National Insurance contributions. This will allow the Board to discharge its duties and meet the challenges it faces in response to the impact of more frequent non-domestic revaluations.

The Scottish Government has allocated £91k to each constituent Council in 2026/27 to support the additional costs of implementing the Barclay Review recommendations. This funding is included in the above approved budget of £1,142k.

Further information on the Barclay Review can be found here:

Barclay Report

Recommendation - 12 Point Action Plan

Beyond 2026

A medium-term financial plan (MTFP), forecasting the Board’s income and expenditure requirements over the medium-term was presented to the Board on 10 March 2026. The MTFP aims to allow the Board to demonstrate value for money and improved transparency by setting out how available resources will be deployed going forward, as well as identifying any opportunities where efficiencies may exist.

The MTFP identifies a funding gap over the three-year period 2025/26 to 2027/28 of £102k based on a most “Likely Case” scenario. The MTFP will provide a practical framework within which choices can be identified, debated and approved.

Acknowledgements

Finally, we would like to acknowledge all the hard work of the officers in Orkney Islands Council and the officers of the Board who have had a role in the preparation of these Annual Accounts and those who have worked diligently throughout the year in the delivery of the Board’s objectives.

Stephen Leask
Convener
Orkney & Shetland Valuation Joint Board

Erik Knight FCCA
Treasurer
Orkney & Shetland Valuation Joint Board

Robert Eunson MLE MRICS
Assessor and Electoral Registration Officer
Orkney & Shetland Valuation Joint Board

Annual Governance Statement

Scope of Responsibility

The Orkney and Shetland Valuation Joint Board’s responsibilities are to:

• Ensure its business is conducted in accordance with the law and proper standards.
• Safeguard and properly account for public money.
• Use public money economically, efficiently and effectively.

To discharge the Board’s responsibilities, the Board must put in place proper arrangements for the governance of its affairs, to facilitate the effective exercise of its functions which includes arrangements for the management of risk.

The Governance Framework

The Board is committed to the pursuit of proper corporate governance throughout the services it delivers and to establishing the principles and practices by which this can be achieved. The governance framework is the system by which the Board leads, directs and controls its functions and relates to the community and other stakeholders. It includes the systems, processes, cultures and values through which the Board strives to adhere to the principles of good governance of openness, inclusivity, integrity and accountability.

The Board’s governance environment is consistent with the seven core principles of the revised 2016 CIPFA/SOLACE framework pictured below, which shows each of the seven principles and their interactions.

IMAGE: Diagram of the seven CIPFA/SOLACE governance principles. Principles A and B are at the centre as overarching principles. Principle A is “Behaving with integrity, demonstrating a strong commitment to ethical values and respecting the rule of law”. Principle B is “Ensuring openness and comprehensive stakeholder engagement”. Around them are Principle C, “Defining outcomes in terms of sustainable economic, social, and environmental benefits”; Principle D, “Determining the interventions necessary to optimise achievement of intended outcomes”; Principle E, “Developing the entity’s capacity, including the capability of its leadership and the individuals within it”; Principle F, “Managing risks and performance through robust internal control and strong public financial management”; and Principle G, “Implementing good practices in transparency, reporting and audit to deliver effective accountability”. Arrows show the principles interacting in a cycle.

In the diagram above, Principles A and B contain the overarching principles of good governance which percolate down through the remaining principles.

The table below summarises the Board’s compliance with the CIPFA/SOLACE framework and the CIPFA Financial Management Code and gives examples where the Board demonstrates adherence.

Review of Effectiveness

The Board has a responsibility for ensuring the continuing effectiveness of the governance framework and systems of internal control. The review of effectiveness is informed by:

• Progress towards key strategic and service objectives, as demonstrated through regular performance reporting on targets and key performance indicators.
• Financial and budget monitoring.
• Internal audit reviews on the systems of the Board.
• The work of managers within the Board.
• The Annual Accounts.
• External audits.

The internal audit function is provided by Orkney Islands Council following a decision by the Board on 3 March 2022. Strategic planning, professional management and reporting for the internal audit function of Orkney Islands Council is provided by the Council’s Chief Internal Auditor. An Internal Audit Strategy and Plan for 2025/26 was considered by the Board on 27 March 2025.

The Chief Internal Auditor provides an annual internal audit opinion based on an objective assessment of the framework of governance, risk management and control. It is the opinion of the Chief Internal Auditor, on the basis of the audit work performed in 2025/26, that the Board has a framework of controls in place that provides substantial assurance regarding the organisation’s governance framework, related internal controls, and the management of key risks. The actions identified during the audit work carried out were all low priority and did not impact on the overall governance arrangements of the Board.

Significant Governance Issues

The system of governance can provide only reasonable, and not absolute, assurance that assets are safeguarded, transactions are authorised and properly recorded, material errors or irregularities are either prevented or would be detected within a timely period and all the significant risks impacting on the achievement of our objectives have been mitigated.

No new significant governance issues were identified during financial year 2025.26.

Stephen Leask
Convener
Orkney & Shetland Valuation Joint Board

Conclusion

The Governance Framework has been in place for the financial year ended 31 March 2026 and up to the date of approval of the annual accounts. Effective governance arrangements remain a key priority for the Board.

Overall, we consider that the governance arrangements and internal control environment operating throughout financial year 2025/26 provide reasonable and objective assurance that significant risks impacting on the achievement of our principal objectives will be identified at an early stage, and that this should allow for appropriate and timeous actions to be taken to avoid or mitigate their impact.

Robert Eunson MLE MRICS
Assessor and Electoral Registration Officer
Orkney & Shetland Valuation Joint Board

Remuneration Report

Introduction

The Remuneration Report is set out in accordance with the Local Authority (Scotland) Regulations 2014 (SSI 2014/200). These regulations require various disclosures on the remuneration and pension benefits of senior Councillors and employees.

All disclosures in the tables below in relation to remuneration, pay bands, exit packages and pension benefit are audited by KPMG. The other sections of the Remuneration Report are reviewed by KPMG to ensure that they are consistent with the Financial Statements.

Remuneration arrangements of Senior Councillors

The remuneration of Councillors is regulated by the Local Governance (Scotland) Act 2004 (Remuneration) SSI No. 2018/38 and the (Remuneration) Regulations 2007 (SSI No. 2007/183). The Regulations provide for the grading of Councillors for the purposes of remuneration arrangements, as the Leader of the Council, the Convener of the Council, Senior Councillors and Councillors. These regulations set out the amounts a Councillor may be paid for being a Convener or Depute Convener of a Joint Board. This is inclusive of any amount payable to them as either a Councillor or Senior Councillor. The Convener and Depute Convener are the only two Senior Councillor positions recognised by the Board.

The Board has an arrangement with each constituent authority to reimburse that Council for the additional costs of the Councillor arising from them being Convener or Depute Convener of the Board. The disclosures made in this report are limited to the amounts paid to the Councils by the Board for remuneration and do not reflect the full value of the remuneration that may be paid to the Councillor.

The Convener and Depute Convener of the Board are remunerated by the Council of which they are an elected member. The regulations permit remuneration of Senior Councillors to one position held.

Disclosure of remuneration for Senior Councillors

Remuneration of Senior Employees

The employees of the Board are employed on terms and conditions of a stand alone pay and grading model which was agreed by the Board in 2021. Senior employees are defined as having responsibility for the management of the Board to the extent that they can direct or control the major activities of the Board.

Disclosure of remuneration for Senior Employees

Remuneration of Officers

The number of officers who received remuneration (excluding pension contributions) in excess of £50k, disclosed in bands of £5k, for the financial year is shown below:

The Treasurer and the Clerk to the Board do not receive remuneration from the Board. The duties of the posts are covered by the post holders’ substantive posts in Orkney Islands Council. Details of their salaries are included in the remuneration report for Orkney Islands Council.

Exit Packages

The Regulations require the Board to disclose in bands the number of exit packages agreed and the cost of those packages to the Board in the financial year in rising bands of £20k up to £100k, and bands of £50k thereafter.

The Regulations also require disclosure of the number of compulsory redundancies and other agreed departures.

Exit packages include compulsory and voluntary redundancy costs, pension contributions in respect of added years, ex-gratia payments and other departure costs.

No exit packages were agreed by the Board during 2025/26 or during the previous year.

Pension details of Senior Councillors

The pension disclosure for Joint Boards for a Convener or Depute Convener is limited to the contribution the Board has been asked to make to that person’s pension by the Council of which the Convener or Depute Convener is a member. No accrued pension benefit needs to be disclosed. Local Government Finance Circular 8/2011 (revised) details the disclosure requirements for Senior Councillors of Joint Boards.

Pension employer contributions – Senior Councillors

Stephen Clackson is a member of the Orkney Islands Council Pension Fund and Stephen Leask is a member of the Shetland Islands Council Pension Fund.

Pension details of Senior Employees

Pension benefits for local government employees are provided through the Local Government Pension Scheme (LGPS). The LGPS is a funded pension scheme, consisting of contributions received from members of the scheme as well as from employers.

From 1 April 2015, the LGPS moved away from a final salary pension scheme to a career average revalued earnings scheme (CARE). This means that pension benefits from 1 April 2015 onwards, are worked out using career average revalued earnings rather than final salary.

The scheme’s normal retirement age for employees is now linked to their state pension age, with the minimum age of 67.

From 1 April 2009, a tiered contribution system was introduced, with contributions from scheme members ranging from a minimum contribution of 5.5% to a maximum contribution of 12%. This is designed to give more equality between the cost and benefits of scheme membership. Prior to 2009 contributions were set at a fixed rate of 6% for all non-manual employees.

If a person works part-time, their contribution rate is worked out on their actual pay for the job. There is no automatic entitlement to a lump sum. Members may opt to give up (commute) pension for a lump sum of up to 25% of their pension value at retirement. The accrual rate guarantees a pension based on 1/49th of actual pay (prior to 1 April 2015 the actual rate guaranteed a pension based on 1/60th of final pensionable salary and years of pensionable service. Prior to 2009, the accrual rate guaranteed a pension based on 1/80th and a lump sum based on 3/80th of final pensionable salary and years of pensionable service).

The tiered contribution rates are as 2025/26 follows:

Pension benefits – Senior Employees

The accrued pension benefits have been calculated to 31 March 2026. These are standard benefits, without reduction on account of its payment at that age; without exercising any option to commute pension entitlement into a lump sum; and without any adjustment for the effects of future inflation.

Stephen Leask
Convener
Orkney & Shetland Valuation Joint Board

Robert Eunson MLE MRICS
Assessor and Electoral Registration Officer
Orkney & Shetland Valuation Joint Board

Statement of Responsibilities for the Annual Accounts

The Board’s responsibilities

The Board is required to:

• Make arrangements for the proper administration of its financial affairs and to secure that the appointed Treasurer has the responsibility for the administration of those affairs (section 95 of the Local Government (Scotland) Act 1973). For the Board, that officer is the Head of Finance of Orkney Islands Council.
• Manage its affairs to secure economic, efficient and effective use of resources and to safeguard its assets.
• Ensure that the Annual Accounts are prepared in accordance with legislation (The Local Authority Accounts (Scotland) Regulations 2014) and, as 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 for signature.

I confirm that these draft Annual Accounts were approved for signature by the Board at its meeting on 30 June 2026.

Signed on behalf of the Orkney & Shetland Valuation Joint Board.

The Treasurer’s responsibilities

The Treasurer, or Proper Officer for Finance, is responsible for the preparation of the Board’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.

In preparing these Annual Accounts, the Proper 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 Code (as far as it is compatible with legislation).

The Treasurer/Proper Officer for Finance has also:

• Kept adequate accounting records which were up to date.
• Taken reasonable steps for the prevention and detection of fraud and other irregularities.

I certify that the Annual Accounts give a true and fair view of the financial position of the Orkney & Shetland Valuation Joint Board at the reporting date and the transactions of the Board for the year ended 31 March 2026.

Robert Eunson MLE MRICS
Assessor and Electoral Registration Officer
Orkney & Shetland Valuation Joint Board

Erik Knight FCCA
Treasurer
Orkney & Shetland Valuation Joint Board

Primary Financial Statements

Comprehensive Income and Expenditure Statement for the year ended 31 March 2026

The CIES shows the accounting cost in the year of providing the service in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation by way of central government grant-in-aid and amounts requisitioned from Orkney and Shetland Islands Councils. Where accounting costs are different from those to be funded from taxation in the year (e.g. pension costs) the difference is shown in the Movement in Reserves Statement.

Movement in Reserves Statement

This statement shows the movement in the year on the different reserves held by the Board, analysed into usable reserves (i.e. those that can be applied to fund expenditure) and other unusable reserves. The Board has no usable reserves.

2025/26

Comparative movements in 2024/25

Balance Sheet as at 31 March 2026

This shows the value as at the Balance Sheet date of the assets and liabilities recognised by the Board.

The draft financial Statements were issued on 30 June 2026.

Erik Knight FCCA
Treasurer
Orkney & Shetland Valuation Joint Board

Notes to the Financial Statements

Note 1: Expenditure and funding analysis

The objective of the Expenditure and Funding Analysis is to demonstrate how the funding available to the Board for the year has been used in providing services in comparison with those resources consumed or earned in accordance with accounting practices.

2025/26

2024/25

Note 2: Accounting Standards issued but not yet adopted

Standards, amendments and interpretations issued but not adopted this year.

At the date of authorisation of these Financial Statements, the Board has not applied the following new and revised IFRS Standards that have been issued but are not yet effective:

• FRS 102, the Financial Reporting Standard issued in March 2024, amendments to Heritage assets.
• IFRS 7 and 9 Financial Instruments issued in May 2024. These amendments clarify the classification and measurement of financial instruments.
• Annual improvements to IFRS accounting standards, issued in July 2024.
• IFRS 7 & 9 amendments relating to nature dependent electricity, issued in December 2024.

The changes are not expected to have a material impact on the Board’s financial statements.

Note 3: Critical judgements in applying accounting policies

In applying the accounting policies, The Board is obliged to highlight whether it has had to make certain judgements about complex transactions or those involving uncertainty about future events. Critical judgements required in the Annual Accounts relate to assumptions related to defined benefit obligation. Further details are included in Note 15 to the Annual Accounts.

Note 4: Assumptions made about the future and other major sources of estimation uncertainty

The Financial Statements contain estimated figures that were based on assumptions made by the Board about the future or that which is 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 assumptions and estimate.

Note 5: Adjustments between Accounting Basis and Funding Basis under regulations

This note, as disclosed in the tables below, details the adjustments that are made to the total CIES, recognised by the Board in the year, in accordance with proper accounting practice, to the resources that are specified by statutory provisions as being available to the Board to meet future expenditure. Such adjustments involve the Pension Reserve and Employee Benefits Reserve by amounts charged for holiday pay to the CIES that are different from the cost of settlements chargeable in the year in accordance with statutory requirements.

2025/26

2024/25

Note 6: Specific Grant Income

Note 7: Short-term Debtors

At the end of 2025/26, £36.9k was owed to the Board from Orkney Islands Council (£42.4k in 2024/25), £0k was owed to the Board from Shetland Islands Council (£0k in 2024/25).

Note 8: Short-term Creditors

At the end of 2025/26, the Board owed Shetland Islands Council £30k (£39.4k in 2024/25) and owed Orkney Islands Council £1k (£1k in 2024/25).

Note 9: Unusable Reserves

Pension Reserve

The Pension Reserve absorbs the timing differences arising from the different arrangements for accounting for post-employment benefits and for funding benefits in accordance with statutory provisions.

The Board accounts for post-employment benefits in the CIES as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs.

However, statutory arrangements require benefits earned to be financed as the Board makes employer’s contributions to pension funds or eventually pays any pensions for which it is directly responsible. The debit balance on the Pension Reserve therefore shows a substantial shortfall in the resources set aside by the Board to meet the benefits earned by past and current employees. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid.

The Pension Reserve total of £138k included in the Board’s statutory accounts for the year ending 31 March 2026 was determined using the approach set out in IFRIC 14. In setting the Pensions Reserve balance it was assumed that the fund would run in perpetuity, using the Projected Current Service Costs, current contribution rates payable by the Council and a net Discount Factor of the Discount Rate less the assumed future Salary Increase Rate. All figures coming from the IAS19 Report provided by Hymans as at 31 March 2026.

The Board has applied a consistent approach to the prior year, recognising the surplus only to the extent that it can be recovered through economic value from potential future reduced contributions. Over the course of the year, an increase in the Discount Rate has diminished this economic value.

Under the asset ceiling test, an asset can only be recognised to the extent that it is recoverable — for example, through future contribution reductions. In this period, the projected future service cost (i.e., the cost of pension benefits accruing for current employees) is lower than the estimated level of future employer contributions. This implies that no contribution holiday is available to the employer, and therefore no economic benefit can be realised from the surplus. As a result of these changes, no pension surplus can be recognised as of 31 March 2026.

The asset ceiling adjustment of £441k is made up of a surplus restriction of £137k, plus a further £104k of additional liabilities arising from unfunded secondary contributions, as required under IFRIC14.

Employee Benefits Reserve

The accrual is charged to Surplus or Deficit on the Provision of Services, then reversed out through the Movement in Reserves Statement so that holiday benefits are charged to revenue in the financial year in which the holiday absence occurs.

Note 10: Nature and Extent of Risks Arising from Financial Instruments

A variety of financial risks may be faced by the Board in holding financial instruments. An assessment on their impact on the Annual Accounts is detailed below:

Credit risk

The possibility that other parties might fail to pay amounts due to the Board. This is considered immaterial on the basis of past experience and the fact that most debt payable to the Board is due from other public bodies.

Liquidity risk

The possibility that the Board might not have funds available to meet its commitments to make payments. Given the Board’s statutory responsibility to have a balanced budget and its constituent authorities’ obligations to fund its activities, this risk is considered immaterial.

Interest rate risk

The possibility that the Board might be exposed to interest rate movements on borrowing and investments. The Board is not exposed to significant interest rate risk from borrowings or investments as at 31 March 2026.

Price risk

The possibility that fluctuations in equity prices have a significant impact on the value of financial instruments held by the Board. The Board does not currently invest in equity shares.

Foreign Exchange risk

The possibility that fluctuations in exchange rates could result in losses to the Board. The Board conducts all its transactions in £ Sterling.

Note 11: Events after the Reporting Period

The draft Annual Accounts were authorised for issue on 23 June 2026. Events taking place after this date are not reflected in the Financial Statements or notes.

Where events took place before this date, providing information about conditions existing at 31 March 2026, then the figures in the Financial Statements and notes have been adjusted in all material respects to reflect the impact of this information. There are no events after the reporting date to disclosed.

Note 12: External Audit costs

Note 13: Related Parties

The Board’s related parties are those bodies or individuals that have the potential to control or significantly influence the Board, or to be controlled or significantly influenced by the Board. The Board is required to disclose material transactions that have occurred with related parties and the amount of any material sums due to or from related parties. Related party relationships require to be disclosed where control exists, irrespective of whether there have been transactions between the related parties.

To enable the Board to carry out its objectives, the member authorities of the Board have contributed requisitions in the following proportions:

• Orkney Islands Council: 50.3% (£563k)
• Shetland Islands Council: 49.7% (£457k)

The Board pays the member authorities for services.

The Board in turn provides services to the member authorities:

Note 14: Right of Use Asset Lease

The Board leases a property in Orkney from Orkney Islands Council, as listed below. The lease covers a five-year period and is due to expire in June 2026. Following adoption of IFRS16 for 2024/25, this lease is accounted for as a Right of Use Asset Lease.

The Council used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17.

• Lease liabilities are measured at the present value of the remaining lease payments at 1 April 2024, discounted by the Council’s incremental borrowing rate at that date.

The weighted average of the incremental borrowing rates used to discount liabilities was 5.5%.

Property, Plant and Equipment

Expenditure charged to the CIES

The minimum lease payments due under non-cancellable leases in future years are:

Shetland premises are provided by Shetland Islands Council. There is no formal lease agreement. The Board’s only obligation is to fund the actual running costs of its share of the building, which was £11k for 2025/26 (£11k for 2024/25).

Note 15: Defined Benefit Pension Schemes

Participation in Pension Schemes

As part of the terms and conditions of employment of its officers, the Board makes contributions towards the cost of post-employment benefits. Although these benefits will not actually be payable until employees retire, the Board has a commitment to make the payments (for those benefits) and to disclose them at the time that employees earn their future entitlement.

The Board participates in two post-employment schemes:

• The Local Government Pension Scheme, administered locally by Shetland Islands Council, is a funded defined benefit career average related earnings scheme, meaning that the Board and employees pay contributions into a fund, calculated at a level intended to balance the pension liabilities with investment assets.
• Arrangements for the award of discretionary post-retirement benefits upon early retirement – this is an unfunded defined benefit arrangement, under which liabilities are recognised when awards are made. However, there are no investment assets built up to meet these pension liabilities and cash has to be generated to meet actual pension payments as they eventually fall due.

The Shetland Islands Council Pension Scheme is operated under the regulatory framework for the Local Government Pension Scheme and the governance of the scheme is the responsibility of the Pension Fund Committee of Shetland Islands Council. The Committee comprises elected members of Shetland Islands Council.

Policy is determined in accordance with the Pensions Fund Regulations. Management of the Fund’s investments is carried out by Shetland Islands Council, which receives recommendations from the Pension Fund Committee. Shetland Islands Council selects and appoints a number of external investment managers/partners and periodically monitors their investment performance.

The principal risks to the authority of the scheme are the longevity assumptions, statutory changes to the scheme, structural changes to the scheme (i.e. large-scale withdrawals from the scheme), changes to inflation, bond yields and the performance of the equity investments held by the scheme. These are mitigated to a certain extent by the statutory requirements to charge the contributing authorities the amounts required by statute as described in Note 16: Accounting Policies.

Impact of McCloud judgement

When the LGPS benefit structure was reformed in 2015, transitional protections were applied to certain older members close to normal retirement age. The benefits accrued from 1 April 2015 by these members are subject to an ‘underpin’ which means that they cannot be lower than what they would have received under the previous benefit structure. The underpin ensures that these members do not lose out from the introduction of the new scheme, by effectively giving them the better of the benefits from the old and new schemes.

In December 2018 the Court of Appeal upheld a ruling (“McCloud/Sargeant”) that similar transitional protections in the Judges’ and Firefighters’ Pension Schemes were unlawful on the grounds of age discrimination. The implications of the ruling apply to the LGPS.

LGPS benefits accrued from 2015 may therefore need to be enhanced so that all members, regardless of age, will benefit from the underpin. Alternatively, restitution may be achieved in a different way, for example by paying compensation.

In either case, the clear expectation is that many more members would see an enhanced benefit rather than just those currently subject to these protections. There will therefore be a retrospective increase to members’ benefits, which in turn will give rise to a past service cost for the Fund employers.

An allowance for the estimated impact of the McCloud judgement was included within the March 2020 funding valuation position. The impact was calculated based on the eligibility criteria of being included within the proposed solution for the McCloud judgement (i.e. any active member who was a participant in the Fund as at 1 April 2012 will be given the greater of the final salary pension or CARE pension upon retirement).

Impact of Virgin Media judgement

In June 2023, the High Court handed down a decision in the case of Virgin Media Limited v NTL Pension Trustees II Limited and others relating to the validity of certain historical pension changes due to the lack of actuarial confirmation required by law. In July 2024, the Court of Appeal dismissed the appeal brought by Virgin Media Ltd against aspects of the June 2023 decision. The conclusions reached by the court in this case may have implications for other UK defined benefit plans. The impact of the case is currently being looked into and no known issues have been flagged at this stage.

Transactions Relating to Post-employment Benefits

The Board recognises the cost of retirement benefits in the reported cost of services when they are earned by employees, rather than when the benefits are eventually paid as pensions. The charge required to be funded in the year, however, is based on the cash payable in the year, so the real cost of post-employment / retirement benefits is reversed out via the Movement in Reserves Statement.

The following transactions have been made in the CIES via the Movement in Reserves Statement during the year:

Pensions Assets and Liabilities Recognised in the Balance Sheet

The amount included in the Balance Sheet arising from the Board’s obligation in respect of its defined benefit plan is as follows:

Reconciliation of the Movements in Fair Value of the Scheme (Plan) Assets

Reconciliation of Present Value of the Scheme Liabilities (Defined Benefit Obligation)

Asset Ceiling Adjustment

Analysis of Pension Fund’s Assets

The Board’s share of the Pension Fund’s assets at 31 March 2026 comprised:

Basis for Estimating Assets & Liabilities

The Board’s share of the liabilities of Shetland Islands Council Pension Fund have been assessed on an actuarial basis using the projected unit credit method: an estimate of the pensions that will be payable in future years dependent upon assumptions about mortality rates, salary levels, etc.

Both the Local Government Pension Scheme and discretionary benefits liabilities have been assessed by Hymans Robertson, an independent firm of actuaries, and estimates are based on the latest full valuation of the Pension Fund at 31 March 2025, projected forward to 31 March 2026. The significant assumptions used by the actuary were:

The estimation of the defined benefit obligations is sensitive to the actuarial assumptions set out in the table above.

The sensitivity analyses below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period and assumes for each change that the analysed assumption changes, while all the other assumptions remain constant. The estimations in the sensitivity analysis have followed the accounting policies for the scheme, i.e. on an actuarial basis using the projected unit credit method.

The Pension Funds do not have an asset and liability matching strategy.

Impact on the Board’s Cash Flows

The objectives of the scheme are to keep the employers’ contributions rate as constant as possible. The Pension Funds have agreed a strategy with the scheme’s actuary to achieve a funding level of 100% in the longer term. The Fund takes account of national changes to the Local Government Pension Scheme in Scotland such as the move from 1 April 2015 to the CARE scheme for future accruals.

Employer’s contributions have been set at 36% for 2025/26. The three years set out in the latest triennial valuation as at 31 March 2021 are as follows:

The total contributions expected to be made by the Board to the Pension Fund in the year to 31 March 2027 is £0.171m.

The weighted average duration of the defined benefit obligation for scheme members is 17 years for 2025/26 (17 years for 2024/25).

Note 16: Accounting Policies

A. General principles

The Financial Statements summarise the Board’s transactions for the 2025/26 financial year and its position at the year-end of 31 March 2026. The Board is required to prepare an annual Statement of Accounts by the Local Authority Accounts (Scotland) Regulations 2014, which Section 12 of the Local Government in Scotland Act 2003 requires to be prepared in accordance with proper accounting practices.

These practices, under Section 21 of the 2003 Act, primarily comprise the Code, supported by International Financial Reporting Standards (IFRS) and statutory guidance issued under Section 12 of the 2003 Act.

The accounting convention adopted in the Financial Statements is principally historical cost, modified by the valuation of pension assets and liabilities where appropriate. The Financial Statements have been prepared on a going concern basis.

B. Accruals of income and expenditure

Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular:

• Revenue from contracts with service recipients, whether for services or the provision of goods, is recognised when (or as) the goods or services are transferred to the service recipient in accordance with the performance obligations in the contract.
• Expenses in relation to services received (including services provided by employees) are recorded as expenditure when the services are received rather than when payments are made.
• Where revenue and expenditure have been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Where debts may not be settled, the balance of debtors is written down and a charge made to revenue in financing and investment income and expenditure for the income that might not be collected.

C. Employee benefits

Benefits payable during employment

Short-term employee benefits are those due to be settled within 12 months of the year-end, such as wages, salaries, paid annual leave, paid sick leave, bonuses and non-monetary benefits (e.g. cars) for current employees, and are recognised as an expense for services in the year in which employees render service to the Board.

An accrual is made for the cost of holiday entitlements (or any form of leave, e.g. time off in lieu) earned by employees but not taken before the year-end, which employees can carry forward into the next financial year. The accrual is made at the wage and salary rates applicable in the following accounting year, being the period in which the employee takes the benefit.

The accrual is charged to the Surplus or Deficit on the Provision of Services, then reversed out through the Movement in Reserves Statement so that holiday entitlements are charged to revenue in the financial year in which the holiday absence occurs.

Termination benefits

Termination benefits are amounts payable as a result of a decision by the Board to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy in exchange for those benefits and are charged on an accruals basis in the CIES at the earlier of when the Board can no longer withdraw the offer of those benefits or when the Board recognises costs for a restructuring.

Post-employment benefits

As part of the terms and conditions of employment of its officers, the Board makes contributions towards the cost of post-employment benefits. These benefits will not become payable until employees retire. The Board has a commitment to make the payments that need to be disclosed at the time that employees earn their future entitlement.

Current employees of the Board are members of the Shetland Islands Council Local Government Pension Scheme, which is administered locally, as are all current pensioners except two who are members of the Orkney Islands Local Government Pension Scheme.

The Local Government Pension Scheme is accounted for as a defined benefits plan.

The liabilities of the Shetland Islands Council’s Pension Fund attributable to the Board are included in the Balance Sheet on an actuarial basis using the projected unit method, i.e. an assessment to the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc., and projections of earnings for current employees.

Liabilities are discounted to their value at current prices using a discount rate derived from a corporate bond yield curve constructed from yields on high quality bonds and recognising the weighted average duration of the benefit obligation determined at the most recent actuarial valuation.

The pension fund assets attributable to the Board are included in the Balance Sheet at their fair value:

• Quoted securities – current bid price.
• Unquoted securities – professional estimate.
• Unitised securities – current bid price.
• Property – market value.

The change in the net pension liability is analysed into the following components:

• Current service cost – the increase in defined benefit obligation as a result of employee service in the current period.
• Past service cost – the change in defined benefit obligation arising from current year decisions whose effect relates to years of service earned in earlier years, which is debited to the Surplus or Deficit on the Provision of Services in the CIES.
• Net interest cost on the defined benefit liability, i.e. net interest expense of the Board – the change during the period in the net defined benefit liability that arises from the passage of time charged to the CIES. This is calculated by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the net defined benefit liability at the beginning of the period, taking into account using the same policies that are applied to the Local Government Pension Scheme.
• Return on plan assets – excluding amounts included in net interest on the net defined benefit liability which are charged to the CIES.
• Actuarial gains and losses – changes in the net pension liability that arise because events have not coincided with assumptions made at the last actuarial valuation, or because the actuaries have updated their assumptions. Actuarial gains and losses are charged to the CIES.
• Contributions paid to the pension fund – cash paid as employer’s contributions to the pension fund in settlement of liabilities which are not accounted for as an expense.

In relation to retirement benefits, statutory provisions require the amount payable by the Board to be the amount paid directly to pensioners in the year, not the amount calculated according to the relevant accounting standards in the CIES.

In the Movement in Reserves Statement this means that there are transfers to and from the Pension Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the Pension Fund and pensioners and any such amounts payable but unpaid at the year-end. The negative balance that arises on the Pension Reserve thereby measures the beneficial impact to the Board of being required to account for retirement benefits on the basis of cash flows rather than as benefits earned by employees.

Discretionary benefits

The Board has restricted powers to make discretionary awards of retirement benefits in the event of early retirements. Any liabilities estimated to arise as a result of an award to any member of staff are accrued in the year of the decision to make the award and accounted for using the same policies that are applied to the Local Government Pension Scheme.

D. Overheads and support services

Whereby, under agreement with the Board, the constituent authorities place their own staff at the disposal of the Board, the Board pays to that authority such amounts as may be agreed for such services in accordance with the Board’s arrangements for accountability and reporting financial performance. Certain support service costs are provided under a Service Level Agreement between the Board and the service provider.

E. Leases

In 2024/25, the Board applied International Financial Reporting Standard 16 (IFRS 16) Leases as adopted by the Code of Accounting Practice. As a result arrangements previously accounted for as operating leases must now show a right-of-use asset and a lease liability on the balance sheet from 1 April 2024.

IFRS 16 has been applied retrospectively, but with the cumulative effect recognised at 1 April 2024. This means that right-of-use assets and lease liabilities have been calculated as if IFRS 16 had always applied but recognised in 2024/25 and not by adjusting prior year figures.

As a lessee, the Board previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Board.

F. Government grants and other contributions

Whether paid on account, by instalments or in arrears, government grants, third party contributions and donations are recognised as due to the Board when there is reasonable assurance that:

• The Board will comply with the conditions attached to the payments.
• The grants or contributions will be received.

Amounts recognised as due to the Board are not credited to the CIES until conditions attaching to the grant or contribution have been satisfied. Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors. When conditions are satisfied, the grant or contribution is credited to the Specific Grant Income line in the CIES.

G. Events After the Reporting Period

Events after the Balance Sheet reporting period are those events, both favourable and unfavourable, that occur between the Balance Sheet date and the date when the statement of accounts is authorised for issue.

Two types of events can be identified:

• Those that provide evidence of conditions that existed at the end of the reporting period, whereby the Financial Statements are adjusted to reflect such events.
• Those that are indicative of conditions that arose after the reporting period, whereby the Financial Statements are not adjusted to reflect such events; where a category or events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect.

Events taking place after the date of authorisation for issue are not reflected in the Financial Statements.

H. Value Added Tax

VAT payable is included as an expense only to the extent that it is not recoverable from Her Majesty’s Revenue and Customs. VAT receivable is excluded from income.