Audited Annual Accounts 2023/24

IMAGE: Cover page for the Orkney & Shetland Valuation Joint Board’s Audited Annual Accounts 2023/24. It shows the words “Audited Annual Accounts 2023/24”, a map of Orkney and Shetland, and the Orkney & Shetland Valuation Joint Board logo.

Contents

• Management Commentary — 1
• Annual Governance Statement — 9
• Remuneration Report — 18
• Statement of Responsibilities for the Annual Accounts — 22
• Independent Auditor’s Report — 23
• Primary Financial Statements — 27
• Comprehensive Income and Expenditure Statement for the year ended 31 March 2024 — 27
• Movement in Reserves Statement — 28
• Balance Sheet as at 31 March 2024 — 29
• Notes to the Financial Statements — 30
• Note 1: Expenditure and Funding Analysis — 30
• Note 2: Accounting Standards Issued but not yet Adopted — 31
• Note 3: Critical Judgements in Applying Accounting Policies — 31
• Note 4: Assumptions made about the future and other major sources of estimation uncertainty — 31
• Note 5: Adjustments between Accounting Basis and Funding Basis under regulations — 31
• Note 6: Specific Grant Income — 32
• Note 7: Short-term Debtors — 32
• Note 8: Short-term Creditors — 32
• Note 9: Unusable Reserves — 32
• Note 10: Nature and Extent of Risks Arising from Financial Instruments — 33
• Note 11: Events after the Reporting Period — 34
• Note 12: External Audit costs — 34
• Note 13: Related Parties — 34
• Note 14: Operating Leases — 35
• Note 15: Defined Benefit Pension Schemes — 35
• Note 16: Accounting Policies — 40

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 2023/24 and understand the year-end financial position as at 31 March 2024. In addition, it provides a narrative on the financial outlook for the Board during financial year 2024/25 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

Substitute Members

Copies of all board papers and minutes are available on OIC’s website: Untitled Document (orkney-shetland-vjb.co.uk). Older minutes can be found at: www.orkney-shetland-vjb.co.uk.

Senior Management Team

Assessor and Electoral Registration Officer: Robert Eunson MLE MRICS

Depute Assessor: Vacant

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: Karen Greaves BEM

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:

http://www.saa.gov.uk/the-assessor.html

Strategy

Service Plan

The Board has a three-year service plan covering financial years 2023 to 2026. 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”

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: Diagram of the eleven core strategic aims and objectives in the Service Plan. The objectives are presented in eleven blue boxes covering statutory requirements, Best Value, innovation, continuous improvement, stakeholder consultation, staff development, performance reporting, equalities, plain language, and work with the Scottish Assessors’ Association.

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.

The Service Plan can be found at:

http://www.orkney-shetland-vjb.co.uk/THE BOARD.html

Performance Information

2023/24 was a challenging year for the Board with employees beginning to deal with Non-Domestic Proposals for the first time. Under Barclay reforms, the former appeal process has been modified so that an initial Proposal stage has to be dealt with before a ratepayer can appeal their Valuation Roll entry. The first ever audit of self-catering entries to confirm their status on the Valuation Roll has taken more resources than was envisaged. All of this meant that the year was very busy and gave an insight into workloads in a 3-yearly Revaluation cycle.

The annual electoral canvass was carried out as usual, and there was one Local Government By Election in Orkney.

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 2024, the Board had:

IMAGE: Statistical infographic showing 4,992 entries in the Valuation Roll, with 48% in Shetland and 52% in Orkney; 35,315 electors, split 50% Shetland and 50% Orkney; a rateable value of £95,276,630, split 65% Shetland and 35% Orkney; and 24,236 Council Tax properties. A bar chart compares the numbers of Shetland and Orkney properties across Council Tax Bands A to G & H.

• Entries in Valuation Roll: 4,992
  • Shetland: 48%
  • Orkney: 52%
• Electors: 35,315
  • Shetland: 50%
  • Orkney: 50%
• Rateable Value: £95,276,630
  • Shetland: 65%
  • Orkney: 35%
• Council Tax Properties: 24,236

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:

The non-financial targets have remained the same as for 2018/19 up to 2023/24.

KPIs for both the Council Tax List and Valuation Roll have taken a significant hit. For Council Tax entries, the fall in performance has been caused exclusively by the fact that self-catering subjects have been moved in a significant volume back to the tax base following implementation of new legislation, and this has to happen retrospectively, i.e. at least one year after the date of entry. For the Valuation Roll, while this has also affected performance, it has additionally been impacted by staff carrying out the self-catering audit being kept from other tasks, and also a high volume of work carried over from 22/23.

Further information on performance can be found here:

http://www.orkney-shetland-vjb.co.uk/KPIWeb06.html

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 2023/24 are due to be reported and considered by the Board on 20 June 2024.

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 14 December 2023. The risk register identified a total of 70 risks and of these no 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; and
• Failure to maintain an up to date Electoral register, through late or non-delivery of household enquiry forms and/or invitations to register.

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.

The Annual Accounts summarise the Board’s transactions for the year and its year-end position at 31 March 2024. 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).

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.

Financial Performance

The 2023/24 budget was approved by the Board on 2 March 2023 and has been funded by the two constituent authorities.

Overall in 2023/24, the Board underspent against its budget. An underspend on employee costs for the year was due in part to the current vacancy of the Depute Assessor.

Additionally, the backpay and relocation expenses increased costs in the previous year. However, operating costs were overspent partially as a result of consultancy fees to cover the vacancy. Moreover, there were increases in Fees & Charges as income from the Department for Levelling Up, Housing & Communities increased from the previous year.

Material Transactions

Pension Liability

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 2024. This indicated a net pension liability for the Board of £310k compared to a net pension liability of £43k as at 31 March 2023.

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%.

Looking Ahead

2024/25 Budget

Looking forward, the Board approved its 2024/25 budget at the Board meeting on 7 March 2024. The approved budget has been set at £1,013k, which is a decrease of £19k (2%) on the 2023/24 revised budget and principally included an allowance for the pay award and for increases in employers’ National Insurance and pension contributions.

The Scottish Government has allocated £72k to each constituent Council in 2024/25 to support the additional costs of implementing the Barclay Review recommendations. This funding is included in the above approved budget of £1,013k.

Beyond 2024

A medium-term financial plan (MTFP), forecasting the Board’s income and expenditure requirements over the medium-term was presented to the Board on 20 June 2024. 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 2024/25 to 2026/27 of £65k based on a most “Likely Case” scenario.

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.

Erik Knight FCCA
Treasurer
Orkney & Shetland Valuation Joint Board
29 October 2024

Robert Eunson MLE MRICS
Assessor and Electoral Registration Officer
Orkney & Shetland Valuation Joint Board
29 October 2024

Stephen Leask
Convener
Orkney & Shetland Valuation Joint Board
29 October 2024

Annual Governance Statement

Scope of Responsibility

The Orkney & 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; and
• 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, which shows each of the seven principles and their interactions.

IMAGE: Governance framework diagram showing Principles A and B as overarching principles in the centre: “Behaving with integrity, demonstrating a strong commitment to ethical values and respecting the rule of law” and “Ensuring openness and comprehensive stakeholder engagement”. Around them are Principles C to G: defining outcomes in terms of sustainable economic, social and environmental benefits; determining interventions necessary to optimise intended outcomes; developing the entity’s capacity; managing risks and performance through robust internal control and strong public financial management; and implementing good practices in transparency, reporting and audit to deliver effective accountability.

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; and
• External audits.

The internal audit function is provided by Orkney Islands Council following a decision by the Board on 3 March 2022. 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 2023/24, 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.

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.

One new significant governance issue was identified during financial year 2023/24.

Update on Significant Governance Issues previously reported

The following table details the actions taken to address the significant governance issues previously reported in the Annual Governance Statement.

Conclusion

The Governance Framework has been in place for the financial year ended 31 March 2024 and up to the date of approval of the annual accounts. Effective governance arrangements remain a key priority for the Board.

Operations in 2023/24 have more or less returned to normal despite the impact of the loss of staff, and the failure to recruit for the vacant Depute Assessor post. During the year, however, these staffing pressures, the impact of Barclay reforms, and the self-catering audit on workloads has impacted performance with several key performance indicators falling from previous year levels.

Notwithstanding the two outstanding governance issue identified above, overall, we consider that the overall governance arrangements and internal control environment operating throughout financial year 2023/24 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.

Stephen Leask
Convener
Orkney & Shetland Valuation Joint Board
29 October 2024

Robert Eunson MLE MRICS
Assessor and Electoral Registration Officer
Orkney & Shetland Valuation Joint Board
29 October 2024

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 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.

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.

Remuneration of Officers

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.

Exit Packages

No exit packages were agreed by the Board during 2023/24 or during the previous year.

Pension details of Senior Councillors

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). The scheme’s normal retirement age for employees is now linked to their state pension age, with the minimum age of 65.

The tiered contribution rates are as follows:

Pension benefits – Senior Employees

The accrued pension benefits have been calculated to 31 March 2024. 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.

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, so far as is compatible with that legislation, in accordance with proper accounting practices; and
• Approve the Annual Accounts for signature.

I confirm that these Annual Accounts were approved for signature by the Board at its meeting on 26 September 2024.

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; and
• Complied with the Code.

The Treasurer/Proper Officer for Finance has also:

• Kept adequate accounting records which were up to date; and
• 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 2024.

Independent Auditor’s Report

Independent auditor’s report to the members of Orkney and Shetland Valuation Joint Board and the Accounts Commission

Reporting on the audit of the financial statements

Opinion on financial statements

We certify that we have audited the financial statements in the annual accounts of Orkney and Shetland Valuation Joint Board for the year ended 31 March 2024 under Part VII of the Local Government (Scotland) Act 1973.

In our opinion the accompanying financial statements:

• give a true and fair view of the state of affairs of the body as at 31 March 2024 and of its income and expenditure for the year then ended;
• have been properly prepared in accordance with UK adopted international accounting standards, as interpreted and adapted by the 2023/24 Code; and
• have been prepared in accordance with the requirements of the Local Government (Scotland) Act 1973, The Local Authority Accounts (Scotland) Regulations 2014, and the Local Government in Scotland Act 2003.

Basis for opinion

We conducted our audit in accordance with applicable law and International Standards on Auditing (UK) (ISAs (UK)), as required by the Code of Audit Practice approved by the Accounts Commission for Scotland. We were appointed by the Accounts Commission on 18 May 2022. Our period of appointment is five years, covering 2022/23 to 2026/27.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern basis of accounting

We have concluded that the use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that may cast significant doubt on the body’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from when the financial statements are authorised for issue.

Other information

The Treasurer is responsible for the other information in the annual accounts. The other information comprises the Management Commentary, Annual Governance Statement, Statement of Responsibilities and the unaudited parts of the Remuneration Report.

We have nothing to report in this regard.

Opinions prescribed by the Accounts Commission

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the Management Commentary for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with statutory guidance issued under the Local Government in Scotland Act 2003; and
• the information given in the Annual Governance Statement for the financial year for which the financial statements are prepared is consistent with the financial statements and that report has been prepared in accordance with the Delivering Good Governance in Local Government: Framework (2016).

Matters on which we are required to report by exception

We have nothing to report in respect of these matters.

Conclusions on wider scope responsibilities

In addition to our responsibilities for the annual accounts, our conclusions on the wider scope responsibilities specified in the Code of Audit Practice, including those in respect of Best Value, are set out in our Annual Audit Report.

Use of our report

This report is made solely to the parties to whom it is addressed in accordance with Part VII of the Local Government (Scotland) Act 1973 and for no other purpose.

Michael Wilkie, for and on behalf of KPMG LLP
319 St Vincent Street
Glasgow
G2 5AS

25 November 2024

Primary Financial Statements

Comprehensive Income and Expenditure Statement for the year ended 31 March 2024

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.

Movement in Reserves Statement

The Board has no usable reserves.

Balance Sheet as at 31 March 2024

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.

Note 2: Accounting Standards Issued but not yet Adopted

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:

• IFRS 16: Leases. HM Treasury have agreed to defer implementation until 1 April 2024;
• IFRS S1: General requirements for Disclosure of Sustainability related financial information. Not yet endorsed for use in the UK, and will not be endorsed for use in the EU;
• IFRS S2: Climate related financial disclosures. Not yet endorsed for use in the UK, and will not be endorsed for use in the EU.

Note 3: Critical Judgements in Applying Accounting Policies

There have been no critical judgements required in 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 estimates.

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

Note 6: Specific Grant Income

There was no Specific Grant Income in 2022/23 and 2023/24.

Note 7: Short-term Debtors

At the end of 2023/24, £48.1k was owed to the Board from Orkney Islands Council (£23.9k in 2022/23), 0k was owed to the Board from Shetland Islands Council (£14.0k in 2022/23).

Note 8: Short-term Creditors

At the end of 2023/24, the Board owed Shetland Islands Council £36.5k and Orkney Islands Council 5k (£20.7k was owed by the Board to Orkney Islands Council in 2022/23).

Note 9: Unusable Reserves

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

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 did not hold any borrowing or investments at 31 March 2024.

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 20 June 2024. Events taking place after this date are not reflected in the Financial Statements or notes.

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.

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: 50.7% (£509k)
• Shetland Islands Council: 49.3% (£495k)

The Board pays the member authorities for services.

The Board in turn provides services to the member authorities:

Note 14: Operating Leases

The Board leases a property in Orkney from Orkney Islands Council. The lease covers a five-year period and is due to expire in June 2026.

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 2023/24 (£11k for 2022/23).

Note 15: Defined Benefit Pension Schemes

Participation in Pension Schemes

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; and
• Arrangements for the award of discretionary post-retirement benefits upon early retirement – this is an unfunded defined benefit arrangement.

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’.

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. The impact of the case is currently being looked and no known issues have been flagged at this stage.

Pensions Assets and Liabilities Recognised in the Balance Sheet

Analysis of Pension Fund’s Assets

Impact on the Board’s Cash Flows

Employer’s contributions have been set at 36% for 2023/24.

The total contributions expected to be made by the Board to the Pension Fund in the year to 31 March 2025 is £0.139m.

Note 16: Accounting Policies

A General principles

The Financial Statements summarise the Board’s transactions for the 2023/24 financial year and its position at the year-end of 31 March 2024.

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 is recognised when 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 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.

C Employee benefits

Short-term employee benefits 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 earned by employees but not taken before the year-end.

The Local Government Pension Scheme is accounted for as a defined benefits plan. The change in the net pension liability is analysed into current service cost, past service cost, net interest cost, return on plan assets, actuarial gains and losses, and contributions paid to the pension fund.

D Overheads and support services

Where 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.

E Leases

Rentals paid under operating leases are charged to the CIES as an expense of the services benefitting from use of the leased property, plant or equipment. Charges are made on a straight-line basis over the life of the lease.

F Government grants and other contributions

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 and the grants or contributions will be received.

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; and
• Those that are indicative of conditions that arose after the reporting period.

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.

Board Representation Letter

Orkney & Shetland Valuation Joint Board

8 Broad Street, Kirkwall, Orkney, KW15 1NX

29th October 2024

KPMG LLP
319 St Vincent Street
Glasgow
G2 5AS

Dear Sirs,

This representation letter is provided in connection with your audit of the financial statements of Orkney and Shetland Valuation Joint Board (“the VJB”), for the year ended 31st March 2024 for the purpose of expressing an opinion:

1. as to whether these financial statements give a true and fair view of the state of the VJB’s affairs as at 31st March 2024 and of the VJB’s income and expenditure for the financial year then ended;
2. whether the VJB financial statements have been properly prepared in accordance with UK adopted international accounting standards, as interpreted and adapted by the Code of Practice on Local Authority Accounting in the United Kingdom 2023-24; and
3. whether the financial statements have been prepared in accordance with the requirements of the Local Government (Scotland) Act 1973, The Local Authority Accounts (Scotland) Regulations 2014, and the Local Government in Scotland Act 2003.

These financial statements comprise the following: The Comprehensive Income and Expenditure Statement, Movement in Reserves Statement, Balance Sheet and notes to the financial statements, including a summary of significant accounting policies and other explanatory information.

I confirm that the representations it makes in this letter are in accordance with the definitions set out in Appendix 1 to this letter.

Financial statements

1. I have fulfilled my responsibilities for the preparation of financial statements that:
   • give a true and fair view of the state of the VJB’s own affairs as at the end of its financial year and of the VJB’s own income and expenditure for that financial year;
   • have been properly prepared in accordance with UK adopted international accounting standards; and
   • have been prepared in accordance with the requirements of the relevant legislation.

The financial statements have been prepared on a going concern basis.

2. The methods, the data and the significant assumptions used by me in making accounting estimates and their related disclosures are appropriate.

3. All events subsequent to the date of the financial statements and for which IAS 10 requires adjustment or disclosure have been adjusted or disclosed.

Information provided

4. I have provided you with:

• access to all information relevant to the preparation of the financial statements;
• additional information requested for the purpose of the audit; and
• unrestricted access to persons within the VJB from whom audit evidence was required.

5. All transactions have been recorded in the accounting records and are reflected in the financial statements.

6. I have disclosed the results of my assessment of the risk that the financial statements may be materially misstated as a result of fraud.

7. I have disclosed all information in relation to fraud or suspected fraud affecting the VJB.

8. I have disclosed all known instances of non-compliance or suspected non-compliance with laws and regulations.

9. I have disclosed and appropriately accounted for or disclosed all known actual or possible litigation and claims.

10. I have disclosed the identity of the VJB’s related parties and all related party relationships and transactions of which I am aware.

11. I confirm that:

• The financial statements disclose all key risk factors, assumptions and uncertainties surrounding the VJB’s ability to continue as a going concern.
• No material events or conditions exist that may cast significant doubt on the ability of the VJB to continue as a going concern.

This letter was tabled and agreed at the meeting of the Orkney and Shetland Valuation Joint Board on 26 September 2024.

Yours faithfully,

Erik Knight
Treasurer

29 October 2024

Appendix 1 to the Board Representation Letter

Definitions

Financial Statements

IAS 1.10 states that a complete set of financial statements comprises:

• a statement of financial position as at the end of the period;
• a statement of profit or loss and other comprehensive income for the period;
• a statement of changes in equity for the period;
• a statement of cash flows for the period;
• notes, comprising a summary of significant accounting policies and other explanatory information;
• comparative information in respect of the preceding period; and
• a statement of financial position as at the beginning of the preceding period when an entity applies an accounting policy retrospectively, makes a retrospective restatement, or reclassifies items in its financial statements.

Additionally, the financial statements contain the VJB’s Statement of Financial Position, Statement of Movement in Reserves and related notes.

Material Matters

“Material omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions that users make on the basis of the financial statements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances.”

Fraud

Fraudulent financial reporting involves intentional misstatements including omissions of amounts or disclosures in financial statements to deceive financial statement users.

Misappropriation of assets involves the theft of an entity’s assets. It is often accompanied by false or misleading records or documents in order to conceal the fact that the assets are missing or have been pledged without proper authorisation.

Error

An error is an unintentional misstatement in financial statements, including the omission of an amount or a disclosure.

Prior period errors are omissions from, and misstatements in, the entity’s financial statements for one or more prior periods arising from a failure to use, or misuse of, reliable information that was available when financial statements for those periods were authorised for issue and could reasonably have been obtained and taken into account.

Management

For the purposes of this letter, references to “management” should be read as “management and, where appropriate, those charged with governance”.

Related Party and Related Party Transaction

A related party is a person or entity that is related to the entity that is preparing its financial statements.

A person or a close member of that person’s family is related to a reporting entity if that person:

• has control or joint control over the reporting entity;
• has significant influence over the reporting entity; or
• is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.

An entity is related to a reporting entity if any of the following conditions applies:

• The entity and the reporting entity are members of the same group.
• One entity is an associate or joint venture of the other entity.
• Both entities are joint ventures of the same third party.
• One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
• The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity.
• The entity is controlled, or jointly controlled, by a person identified above.
• A person identified above has significant influence over the entity or is a member of the key management personnel of the entity.

A reporting entity is exempt from the disclosure requirements of IAS 24.18 in relation to related party transactions and outstanding balances with:

• a government that has control or joint control of, or significant influence over the reporting entity; and
• another entity that is a related party because the same government has control or joint control of, or significant influence over, both the reporting entity and the other entity.

Related party transaction: A transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.