Aberdeen City Council Unaudited Annual Accounts 2023/24

UNAUDITED ANNUAL ACCOUNTS

FOR THE PERIOD

1 APRIL 2023 TO 31 MARCH 2024

Page 1

Contents

Management Commentary

Note 13 Unusable Reserves

Note 33 Short Term Debtors

123

Statement of Responsibilities

Note 14 Cash Flow – Operating

Activities

Note 34 Short Term Creditors

124

Annual Governance Statement

Note 15 Cash Flow - Investing

Activities

Note 35 Provisions

124

Remuneration Report

Note 16 Cash Flow - Financing

Activities

Note 36 Contingent Assets &

Liabilities

126

Movement in Reserves Statement

Note 17 Cash and Cash Equivalents

Note 37 Grant Income

129

Comprehensive Income and Expenditure

Statement

Note 18 Trading Operations

Note 38 Financial Instruments

133

Balance Sheet

Note 19 Agency Services

Note 39 Nature and Extent of Risks

Arising from Financial Instruments

136

Cash Flow Statement

Note 20 External Audit Costs

Note 40 Restatement of the CIES

140

Note 1 Accounting Policies

Note 21 Pension Schemes Accounted

for as Defined Contribution Schemes

Loans Fund

141

Note 2 Accounting Standards Issued, not yet

Adopted

Note 22 Defined Benefit Pension

Schemes

Housing Revenue Account

143

Note 3 Critical Judgements in Applying

Accounting Policies

Note 23 Events After the Balance

Sheet Date

104

National Non-Domestic Rates

148

Note 4 Assumptions Made about the Future &

Other Major Sources of Estimation Uncertainty

Note 24 Related Parties

104

Council Tax

150

Note 5 Adjustments between Accounting Basis

and Funding Basis under Regulations

Note 25 Leases

109

Common Good

152

Note 6 Transfers to/from Earmarked Reserves

and Other Statutory Funds

Note 26 Investment Properties

110

Trust Funds & Endowments

155

Note 7 Expenditure & Funding Analysis

Note 27 Heritage Assets

112

Group Accounts

158

Note 8 Other Operating Expenditure

Note 28 Property, Plant and

Equipment

115

Notes to Group Accounts

163

Note 9 Financing and Investment Income and

Expenditure

Note 29 Capital Expenditure &

Financing

120

Note 10 Taxation & Non-Specific Grant Income

Note 30 PPP and Similar Contracts

121

Note 11 Material Items of Income and Expense

Note 31 Assets Held for Sale

122

Note 12 Usable Reserves

Note 32 Inventories

123

Aberdeen City Council Unaudited Annual Accounts 2023/24

Page 2

Management Commentary

Introduction

The purpose of the management commentary is to inform users of the Annual Accounts and help them assess how the Council has performed during 2023/24 and understand our

financial performance for the year to 31 March 2024. It also provides an insight into the medium-term financial planning we undertake to provide financial stability, to allow our

customers to have confidence that we can continue to provide the diverse portfolio of services on which they rely. Our performance reporting and core financial statements for

2023/24 meet the requirements of the Council and of the London Stock Exchange (LSE) and provide financial transparency for citizens of the City and beyond.

This publication represents the Annual Accounts of both Aberdeen City Council (the Council) and its group for the year ended 31 March 2024, which have been compiled in accordance

with the Code of Practice on Local Authority Accounting in the United Kingdom 2023/24 (the Code). The Code is based on International Financial Reporting Standards (IFRS) and

as such the accounts provide a reconciliation between the two reporting methodologies.

The option to defer the implementation of the new IFRS 16 for Lease Accounting until 1 April 2024 that was issued in 2021/22 remains in place. This standard would have replaced

IAS 17 and removes the operating classification for leases, eliminating the ability for organisations to keep operating leases off balance sheet, by reporting them as a note to the

accounts. With the new standard all leases will be considered finance leases unless they meet the specific exception criteria. The Council has decided to defer implementation at this

time.

The Accounts Commission has appointed Audit Scotland as External Auditors for the Council for the five years period commencing 2022/23 and ending 2026/27. The Council worked

to its previously planned timetable for presentation of the unaudited Annual Accounts to Audit Risk and Scrutiny Committee in May 2024 with approval of the audited Annual Accounts

planned for 27 June 2024.

The Audit Scotland, External Audit Strategy will be reported to the Audit, Risk and Scrutiny Committee on 9th May 2024. This sets out risks that may require to be mitigated in the

preparation of the 2023/24 accounts that was reviewed by External Audit. Full details can be viewed at the Council’s website in Committee reports for the meeting at the link above.

Highlights from 2023/24

Aberdeen City Council is the main provider of services to the City’s citizens and those who visit, work, and do business in the city encompassing the wider North East population.

Our resources are focused on the provision of Education, Social Work, Housing, Environmental and Community services, as well as supporting investment in the City’s infrastructure.

In 2023/24, the Children and Family Services Function was our largest spending responsibility, accounting for £256 million of our total £501 million net service expenditure. We

provided Education and Integrated Children’s Services to over 25,000 children. The Resources Function supplied Operational and Protective services including roads, and waste

collection services at a cost of £58 million. £44 million was spent on our Customer Function that includes support for those who are homeless and community and customer facing

services. £121 million was invested in Adult Social Work services as our contribution to the Integration Joint Board partnership with NHS Grampian. The balance of £22 million was

spent on the Commissioning Function. Corporately we incurred costs of £61 million, £43 million of which was the cost of interest on borrowing. Expenditure on Council Housing was

£105 million, managing and maintaining over 23,258 homes, and was funded entirely from housing rents and associated charges.

In 2023/24, we received income of £566 million, comprising £257 million and £142 million raised locally through non-domestic rates and council tax respectively, whilst £167 million

was received from government grants.

Aberdeen City Council Unaudited Annual Accounts 2023/24

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The City Council’s Revenue Position

In setting its 2023/24 General Fund (GF) budget on 1 March 2023 against a backdrop of a reducing revenue grant and £46.6 million of budget savings, the budget gap was proposed

to be met by a range of savings options. These included alterations to the Non-Domestic Rates Empty Property Relief Scheme, a 5% increase in Council Tax, a redesign of Council

services to address demand in line with a commissioning led approach; the use of a Scottish Government permitted fiscal flexibility, and the use of earmarked reserves to maintain

services and fund priorities. The budget report and minute sets out the detailed proposals, risks, and assumptions behind the future financial proposals.

The legacy and continuing impact of the Covid-19 pandemic continued to be felt by the Council during 2023/24, in relation to supporting our citizens and our city, and in terms of the

impact on Council finances. The slow recovery of income has been challenging with customer behaviour from the pandemic having a longer-lasting effect than had been expected.

This has been particularly relevant with car parking income, venue and events income, and commercial property receipts.

High inflation has had the result of increasing the cost of government borrowing, increasing borrowing rates for individuals, businesses, and the public sector at large, with local

authorities seeing significant increases in borrowing rates through the PWLB. The cost of new borrowing has increased and with inflation and construction inflation at high levels also

being key factors, the Council has seen the cost of capital investment rise substantially for both the General Fund and the Housing Revenue Account. The higher levels of RPI have

had an impact on the Bond repayments and the lease cost that the Council pays for Marischal Square. The high cost of energy has affected almost all the Council’s services during

2023/24, and the influence of increasing inflation that reached 40-year high in 2022/23, although now lower it continues to affect the cost of goods and services to the Council.

Demand has continued to rise for our services this year, with attention being drawn to changes in our population, specifically rising school rolls, which are on the back of increased

numbers of families in the city, whether through the dispersal and resettlement schemes, welcoming those fleeing harm and seeking sanctuary, and through the University schemes

to attract international students to the City, with their families. While funding of a one-off nature has been provided by UK and Scottish Governments for these resettlement schemes

our costs have risen particularly in providing education, and children and families services. Increased homelessness presentations are also affecting our finances with significant

levels of temporary accommodation being needed. The Council has also been required to address the Ukrainian refugee situation with over 1,300 people being supported in the city

in 2023/24, and while income has been received from both UK and Scottish Governments to support services, much of this is one-off funding and unspent funds are being carried

forward to support ongoing expenditure.

Approved in the budget for 2023/24 the Council applied the fiscal flexibility to the accounting treatment of its service concession arrangements, as detailed in the Local Government

finance circular 10/2022. The Council has two such arrangements – the 3Rs Schools, and Lochside Academy. The accounting treatment of the debt profile has been amended to

spread them over the useful lives of the asset rather than the contract lives. The contract lives were 31 years and 26 years respectively. These have been recalculated using the

Children &

Family,

£255,569,000,

45%

Resources,

£57,735,000, 10%

Customer,

£44,447,000, 8%

Integration Joint

Board,

£121,483,000,

22%

Commissioning,

£22,176,000, 4%

Corporate,

£64,122,000, 11%

Annual Percentage Spend per Function 2023-24

Scottish

Government

Grants,

£166,897,000,

30%

Council Tax,

£141,475,000,

25%

Non Domestic Rates,

£257,378,000, 45%

Annual Percentage from Core Income 2023-24

Aberdeen City Council Unaudited Annual Accounts 2023/24

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annuity method over the 60 years useful life. A total saving of £39.886m was released to the general fund earmarked reserves from Unusable Reserves. This comprised a £35.179m

pre 2023/24 saving, and £4.707m saving for 2023/24.

The final operational out-turn position was a balanced budget on the General Fund. After considering group accounting adjustments and movements in reserves and a £1.525 million

deficit on the Housing Revenue Account, there was an overall deficit for the Council of £1.525 million - details are as noted in the Revenue section on page 11. This will be reported

to the Finance & Resources Committee on 9 May 2024.

The Council approved the revised reserves policy in March 2024. Usable reserves stood at £155 million as at 31 March 2024, a decrease of £1 million on the previous year.

The Council’s Capital Position

The supply chain disruption which began during the Covid-19 pandemic continued in 2023/24 and is reflected in the total £234 million investment recorded for the Capital Programme

for the year. The Construction Industry continued to experience shortages of products, raw materials, staffing and logistical support across the UK, compounded by the largest

increase in energy prices seen in recent years. . The Red Sea disruption also exacerbated supply chain issues for some commodities.

Despite the continued and emerging challenges faced this year, progress was made on a range of projects:

• The Energy from Waste (EfW) facility achieved its Acceptance Certificate on 12 December 2023, and formally moved into the 20 year Services (operations) phase of

the contract. This was a project being carried out in collaboration with Aberdeenshire and Moray Councils, to avoid waste being sent to landfill in future and use those

resources for the production of electricity, and heat for the Torry Heat Network.

• South College Street Junction Improvements (Phase 1) as at the start of July 2023 all project roads and junctions reopened. The works are now complete with additional

lanes on Palmerston Place and South College Street between its junctions with Wellington Place and Riverside Drive fully operational. The new North Esplanade West/

Palmerston Place junction is also in use.

• Construction commenced on the new North East Scotland Shared Mortuary in Aberdeen, a multi-agency project with local public sector partners. The project is currently

expected to be complete in late Autumn/Winter 2024/25. The operating agreement between Partners is currently being drafted.

• Tillydrone Cruyff Court works have progressed with a completion date of Spring 2024 this is dependent on weather conditions for surfacing works..

• Work commenced on the Tolbooth roof and parapet works (Condition & Suitability Programme) in June 2023 with completion planned for Autumn 2024 however this is

likely to be delayed due to the additional works being required as new areas of dilapidation are uncovered. This is typical with repairs works to the external fabric of a

century building

• The Council continued its commitment to its New Schools and Early Learning programmes. Greyhope School & Community Hub was completed in October 2023, Works

on the Tillydrone Primary School (New Riverbank Primary School) is progressing on site despite some delays due to the weather. And Bucksburn Temporary

Accommodation is now in operation.

• The Council on 6 March 2024 renewed their commitment to the School Estate Plan, based on need and condition, and the commitment to build a new Hazlehead

Academy, the building of a new school building for Riverbank Primary, create a refurbished and expanded home for St Peter’s Primary and investment in Victorian

school buildings.

• Design development work has continued across a portfolio of projects in and around the city centre and Financial Close is expected to be concluded soon with regard

to the New Market, Union Street Central and Beach Phase A projects.

The fire at Altens East Recycling and Recovery Centre in July 2022 devastated the site, the demolition and rebuild that has now commenced is subject of insurance claims by

the Council and the operator, Suez Recycling and Recovery UK Ltd. The loss of the materials recycling sorting equipment meant recycling collections have to be transferred to

Hartlepool, which has compromised the Council’s income from recyclate sales. It is unlikely these income streams can be reinstated until the rebuild is complete and activity can

recommence at Altens East.

Aberdeen City Council Unaudited Annual Accounts 2023/24

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Following a review of its properties the Council has discovered the presence of Reinforced Autoclaved Aerated Concrete (RAAC) Planks in a small number of public buildings

and also identified RAAC in some of its housing stock in the Balnagask area of the city. Details of this have been published by the Council and can be found here. An options

appraisal is currently underway and this will determine the actions to be taken going forward, these could include remediation work or demolition.

In the Housing Capital Programme progress has been delayed in areas which involve mixed ownership, for example in the Free from Serious Disrepair category structural

improvements within the multi storeys and flat roofs. Prioritisation of work on voids has continued which has shifted resources from capital to revenue works during the year.

This has resulted in lower than budgeted spend on heating system replacement, kitchens, and bathrooms. The programmes that weren’t delivered in 2023/24 have been rolled

forward into 2024/25.

The 2,000 new homes programme is progressing well with further homes at the Tillydrone, Cloverhill and Summerhill sites being handed over to the Council in 2023/24. The

programme in 2023/24 has included developer led projects such as Cloverhill in Bridge of Don, Council led projects such as Kaimhill, Tillydrone and Summerhill with work on

Craighill and Kincorth currently being suspended. The decision was taken to retender the works at Craighill and Kincorth.

Contingent liabilities were identified considering additional project cost uncertainty, details can be seen on page 126. The changing profile of capital expenditure will be reflected

in future capital financing plans and the capital programme adjusted accordingly.

The impact on the funding of the Capital programme is that there was a lower borrowing requirement in 2023/24 than originally expected. Ongoing scrutiny and monitoring of the

various Capital projects is the responsibility of the Finance and Resources Committee with the most recent project update being presented to this committee on 13 March 2024.

Progress of the major Housing Capital projects are reported to Communities, Housing and Public Protection Committee with the most recent update reported on 28 March 2024.

The City Council’s Group

The Council has a number of Arm’s Length External Organisations (ALEOs), several of which form part of our group and are reflected in the group accounts on pages 158 to

176. Significant investment is made in ALEOs by the Council, and proper consideration must be given to their performance and governance arrangements. All ALEOs were

affected by the pandemic and were fully supported and monitored by the Council during this time. Assurance was also taken from reserves positions of many, in light of the

impact on their financial sustainability. By April 2022 all were fully operational again to external customers. The Council’s ALEO Assurance Hub is in place to scrutinise a range

of information including operational and financial performance and people and risk management. This provides a strong platform from which to ensure review of the performance

of ALEOs is embedded in the Council’s culture.

The Council and Our Plans and Performance

Who we are - We are one of 32 Councils in Scotland. We have 9,710 employees and their commitment, professional approach and expertise is critical to service delivery.

The very nature of our services is such that we employ a diverse range of talented people including teachers, social workers, craft and trades workers, community and housing

support workers, engineers, solicitors, accountants, roads and waste operatives, carers, managers, team leaders and administrators, to name but a few.

The organisational structure in 2023/24 was a 4 Director Model (plus the Aberdeen City & Social Care Partnership). During 2023/24 a review of the structure was undertaken

with a view to amend the senior management arrangements at Director and Chief Officer level. With the retirement of the Director of Resources in March 2024, the structure was

approved by Council, and with effect from April 2024 will be altered to a 3 Director Model, see diagram below. New portfolios, changing the way specific Clusters and services

are managed and delivered was incorporated and full details of the restructure were reported to Council on 7 February 2024.

Aberdeen City Council Unaudited Annual Accounts 2023/24

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• What we do - Our governance is overseen by 45 members who are elected every 5 years by the citizens of Aberdeen. Following the Local Government Election

on 5 May 2022, a partnership was formed by the Scottish National Party (SNP) and Liberal Democrats.

• Council Leaders – In May 2022, at the Statutory meeting of the Council, Councillors Alex Nicoll and Ian Yuill were appointed as co-leaders of the Council. Councillor

Christian Allard was appointed co-leader of the Council following a meeting of the Urgent Business Committee on 23 May 2023, replacing Councillor Alex Nicoll who

had announced he was stepping down.

• Our goals and plans - The Council operates across different planning levels from the North East region to individual localities, whilst internally planning from the

corporate level to individual members of staff. Our key documents can be found below and are available to view on the Council’s website as detailed.

• Council Delivery Plan 2023/24

On 1 March 2023 the Council Delivery Plan 2023/24 was approved. Full details can be viewed here. The plan continues to build on the achievement of the council vision.

The Council Delivery Plan sets out the Council’s contribution to:

• Aberdeen City’s Local Outcome Improvement Plan

• The Council’s Policy Statement • National, Regional and City Strategy

• New & emerging legislative duties

Each of these establishes a range of commitments and requirements and the Council Delivery Plan identifies how the Council will meet these for 2023/24.

The ‘Performance Management’ section of the plan explains how we monitored and tracked progress to ensure successful delivery.

The Delivery Plan is aligned to further key

documents below:

• Strategy Framework

On 6 October 2021 the Strategic Commissioning Committee approved the commissioning of strategies that aim to set out the Council’s contribution to the delivery of LOIP

outcomes. The Strategies under development continue to be refreshed and are updated in the Council Delivery plan 2023/24.

• Local Outcomes Improvement Plan (LOIP)

The LOIP was adopted during 2016/17, establishing improvement outcomes and associated measures for a ten- year period, to be monitored and reported, in

terms of outcomes, to the

Community Planning Aberdeen (CPA) Board. The LOIP was refreshed in 2021 and approved by the CPA Board on

7 July 2021

this followed

Aberdeen City Council Structure from 1 April 2024

Office of Chief Executive

Corporate

Services

City

Regeneration &

Environment

Families &

Communities

Aberdeen City &

Social Care

Partnership

Scottish National

Party

Scottish Labour Scottish

Conservative &

Unionist

Scottish Liberal

Democrats

Independent

4 4

Aberdeen City Council Political Representation as at 31

March 2024

Aberdeen City Council Unaudited Annual Accounts 2023/24

Page 7

an extensive development process which started with the revised Aberdeen City Population Needs Assessment (PNA) for 2021. A refreshed LOIP as at February 2024 is

currently out for consultation and scheduled to go to the CPA board on 29

April 2024. Full details can be viewed at the Council’s website in Committee reports for the

stated date. The LOIP can be viewed on the website of

Community Planning Aberdeen

• Policy Statement

Following the Local Government elections in early May 2022, Council (18 May 2022) agreed that the priorities for the next five years would be as stated in the Policy

Statement “Working in Partnership for Aberdeen”.

Aberdeen City Council Unaudited Annual Accounts 2023/24

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• Climate Change response and Net Zero Vision

Council approved on 28 February 2022 a citywide approach to addressing climate change, as articulated through a Net Zero Aberdeen Routemap which sets a net zero

target for Aberdeen City by 2045 across six themes and the refreshed Aberdeen Adapts, providing a climate adaptation framework for Aberdeen.

The two significant local drivers behind Net Zero Aberdeen and Aberdeen Adapts are the Economic Policy Panel’s recommendations and Moodie’s credit rating, the recent

assessment of which noted that for overall environmental risk, Aberdeen scored neutral to low (E-2), reflecting low exposure across all categories, but a moderately negative

exposure to carbon transition risks given the significant dependence of the city on the oil and gas sector, an issue which the route map now sets out to address.

Based on the data available and looking at the greatest areas of challenge, six themes were identified. The aim of this first iteration of the Routemap, and of the strategies,

is to set that strategic direction for achieving the net zero position and acts as an enabling framework to support the subsequent detailed work required to achieve this goal

under those six themes, which are: - Mobility, Energy Supply, Buildings and Heat, Circular Economy, Natural Environment and Empowerment. Each theme will require a

whole system approach and must be shaped and delivered by businesses, communities and the public and third sectors. There is no one single body or organisation that

can achieve the overall aim and while some organisations will have larger roles across the different individual themes everyone across the city has a role to play. The

Routemap is also clear that there are significant interdependencies across all the themes. The Empowerment theme is probably the greatest example of this with behaviour

change now accepted as having the greatest opportunity to reduce emissions across all of themes.

On 9 May 2023 a Draft Net Zero Workplan 2023/24 for partnership activity to support delivery of Net Zero Aberdeen and Aberdeen Adapts was presented to the Net Zero

Environment and Transport Committee for approval.

Aberdeen City Council introduced a Low Emission Zone (LEZ) in Aberdeen city centre on 30 May 2022 with a two year grace period. This means that between May 2022

and 31 May 2024, drivers will not be fined for entering the LEZ with a non-compliant vehicle. Enforcement of the LEZ will start on Saturday 1 June 2024. Costs of £453k

were incurred in 2023/24, these were funded by a Scottish Government grant.

The Aberdeen City Low Emission Zone (LEZ) is being introduced to address air pollution in the city centre, mainly nitrogen dioxide (NO2), caused by road traffic. A low

emission zone (LEZ) is an area where only certain vehicles are allowed to enter based on their emissions standards. There are low emission zones (LEZ) being introduced

to the four biggest cities in Scotland - Aberdeen, Edinburgh, Glasgow, and Dundee in line with legislation issued by the Scottish Government - The Low Emission Zones

(Scotland) Regulations 2021.

• The Target Operating Model

Through our ambitious programme of change, begun in 2017, the Council has transformed its organisational design; it’s governance arrangements; it’s approach to strategic

planning and commissioning of services; it’s use of technology and digital services; fundamental change in service delivery for customers; the nature and role of our workforce;

and how the organisation works collaboratively with its partners. This Delivery Plan shows, throughout, how the operating model supports the planning, commissioning and

delivery of services and allows the Council to meet the range of commitments for the people and place of Aberdeen. The original governance structure aligned to the model

was approved on 6 March 2018, with the Scheme of Governance refreshed annually thereafter.

The current global social, economic, and environmental challenges, including the legacy and continuing impact of Covid-19; inflation and the increasing cost of living; and

climate change are also being felt acutely by the city and people of Aberdeen. This makes it imperative that we extend and accelerate many aspects of our journey of

change, including our joint working with partners; digital access to services; and the use of data to identify those most in need. To support the necessary scale of

transformation, in August 2022 the Council agreed a new Target Operating Model (TOM 1.2) for 2022-27, including identifying the investment required to enable change

and release the level of savings outlined in the Council’s Medium Term Financial Strategy. TOM 1.2 includes:

• An ambitious transformation programme for the Council

Aberdeen City Council Unaudited Annual Accounts 2023/24

Page 9

• Key programmes of multi-agency transformation to tackle areas where shared demand pressures exist and can be mitigated through whole system reform.

• And strategies to further modernise enabling services including Estates and Assets; Customer, Digital and Data; Workforce; and Intervention and Prevention

The key documents can be found at the Council website in Committee reports for the Council meeting in August 2017, and August 2022.

In February 2024 a report was presented to Council to amend the Tom 1.2 functional structure to a Three Director Model following on from the retirement of the Director of

Resources, with amended Tier 2 Functions of Children Families & Communities, Place and Corporate Services, alongside the Health & Social Care Partnership. This new

structure will be effective from 1 April 2024.

• Regional Economic Plan

Approved in December 2015, providing a twenty-year vision for the well-being of the place and our people through a longer-term plan for economic development. Full

details can be viewed on the Council’s website in Committee Reports for the Council meetings on 16 December 2015. Details of the updated action plan for 2018-2023

can be viewed in Committee Reports for the City Growth and Resources Committee on 19 June 2018. Further information on the economic impact of Covid-19 and the

council’s Socio-Economic response is set out below in the section on Outlook including Risks and Uncertainties.

Investing in our workforce

Investing in the future is an important outcome for us. However, investing is not just about infrastructure and buildings. We recognise that the ultimate success of our plans for

the city depends on the quality of our workforce – and that has been even more so in response to, and since the Covid-19 pandemic. We have continued to make significant

investment in developing staff capability at all levels to ensure the long-term sustainability of our workforce. During 2023/24, under the responsibility of our Staff Governance

Committee, we have continued to strengthen the ACC Workforce Plan, Capability Framework and our new approach to Leadership and Management Development. The Council

Delivery Plan for 2023/24 describes our continued activities.

Engaging with our staff

The Workforce Delivery Plan approved 30 January 2023 by the Staff Governance Committee forms part of the TOM 1.2. The purpose of our workforce strategy is to take the

organisational learning from our transformation since 2017, an appreciation of the shifting local and national context, the challenges faced by all councils and the need to drive

change, to set out our path of workforce transformation for the next 5 years that will build the workforce of the future. We will achieve these outcomes through the following levers

with objectives aligned to each:

• Right structures – setting up our structures in a way that supports our cultural aspirations.

• Right people – building our capacity through attracting, recruiting, and moving talent.

• Right skills – building capability through awareness, desire, knowledge, and ability.

• Right place – working where and when is best for the work and the customer.

• Right support – supporting employees to thrive, personally and professionally.

People Managers at Aberdeen City Council play a crucial role in our cultural transformation: in aligning their teams with the strategic aims; supporting them through challenges;

and ensuring they have the right skills and working environment to thrive. Our Leadership & Management Development Programme ensures that the behavioural context for this

group is in place to support the evolving TOM 1.2 structure going forward. Five core capabilities run throughout the capability and development frameworks for all People

Managers and Chief Officers. These capabilities have been built around our Guiding Principles, which were built by employees and for employees. So, in addition to aligning

employees to our strategic goals, the Capability Framework reinforces the culture needed from, and desired by, our workforce.

Diversity at work

As an equal opportunity employer, we comply with our obligations under the Equality Act 2010. As a diverse city we have a diverse workforce and operate with a culture which

is open, fair, and transparent where any unlawful or unfair discrimination, prejudice, stereotyping, or harassment is challenged and addressed. We maintain pay equality within

and across our workforce.

Aberdeen City Council Unaudited Annual Accounts 2023/24

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Our Relationship with Scottish and UK Governments

Annually, the Council receives grant funding from the Scottish Government. While core funding underpins many of the Council services, additional funding from fees and charges,

raising money locally is crucial to supporting the breadth and depth of services the Council is able to provide. The support provided by both Governments to address the costs

of the resettlement of refugees, in particular those fleeing the Russian invasion of Ukraine, has been vital but remains one-off in nature. The Council has continued this year to

work with the Scottish Government to access additional funding in support of the construction of affordable housing in Aberdeen.

We work closely with both governments and seek to help to deliver national policy decisions. Funding of £20 million, through the Levelling Up Fund, was awarded by the UK

Government in support of city centre projects and funding has been drawn down during 2022/23 and 2023/24 and will continue to fund our investment plans over the next year.

Furthermore, work continues to progress on the City Region Deal – a commitment from both governments to invest £125 million each, with Aberdeen City and Aberdeenshire

Councils to improve the infrastructure, business diversification and digital accessibility within the region and the additional commitment to £254 million from the Scottish

Government which demonstrates the strategic importance of the City of Aberdeen as an economic engine room within the UK. Full details can be viewed on the Council Website

in Committee Reports for the Aberdeen City Region Deal Joint Committee. Further information is available including the 2022/23 Annual Report on the City Region Deal Website

at ABZ DEAL.

Performance Management System

The Council is required to report details of its performance across a range of indicators, aligned to identified priorities each year, and does so regularly to our relevant committees.

The Council’s Annual Performance Report 2023-24 will be reported to Committee in September 2024, and will then be available on the Council’s website here . The performance

of all thirty-two councils in Scotland is monitored through the Local Government Benchmarking Framework, through which Audit Scotland in part express its Statutory

Direction on Performance Reporting. The LGBF National Benchmarking Overview Report 2022/23 may be accessed here.

Financial Performance

• Balance Sheet

The Balance Sheet on page 54 shows Net Assets of £1,488 million as at 31 March 2024 (£1,501 million at 31 March 2023), a decrease of £13 million. Long Term Assets

have increased by £172 million (from £3,009 million at 31 March 2023), reflecting an increase in to Property, Plant & Equipment (PPE) of £193 million as a result of the

completion of a new school opening during 2023/24 and the Energy from Waste site became operational, a decrease in Investment Properties of £25 million, and an

increase in Long Term Investments of £4 million. Short Term Assets have increased by £24 million from the previous year, reflecting a decrease in Cash & Cash Equivalents

(£18 million), Short Term Investments (£1 million), and an increase in Short Term Debtors (£43 million). Current Liabilities have increased by £97 million from the previous

year, mainly due to an increase in Short Term Borrowing (£104 million) and a decrease in Short-Term Creditors (£9 million). Long Term (LT) Liabilities have increased by

£112 million, mainly due to an increase in Long Term Borrowing (£82 million) and Pensions Liabilities (37 million).

The Council has continued to reflect the values of Long-Term Assets as at 31 March 2023 in line with current Royal Institute of Chartered Surveyors (RICS) guidance that

has evolved throughout the year and provided additional assurance through more timely valuations of operational building assets and close attention being paid to the

valuation method and assumptions around investment assets. Future liabilities, anticipated as a result of past events, are recognised as Provisions, where reasonably

certain and quantifiable, and Contingent Liabilities where there is less certainty and limited or no data available to quantify any future financial liability. Full details can be

found at Note 36 on page 126.

Total debt outstanding amounts to £1,556 million (2023 £1,371 million). The majority of borrowing comes from the Public Works Loans Board (PWLB) and a Bond Issuance,

with the remainder coming from Market Loans and temporary borrowing from various public bodies and financial institutions. Borrowing predominantly supports the capital

investment programmes but is also used in cashflow management.

• Reserves

Having reached the end of the financial year, a review of the overall position for both revenue and capital has been undertaken (as in previous years) to ensure the Council

is suitably prepared for future revenue and capital investment purposes.

Aberdeen City Council Unaudited Annual Accounts 2023/24

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In certain circumstances, funds are required to be earmarked for use in future years. This can be to fulfil statutory obligations or where funding has been received but has

not yet been spent.

During the year £50 million of these funds were utilised, £35 million from the Service Concession Reserve mainly to aid the Capital Programme, £5 million approved from

second/long term empty homes to fund new build houses, and a further £4 million realigned to support the 2024/25 General Fund Budget. The remainder was used for a

variety of service specific projects. New earmarked funding of £56 million was transferred in during the year. This was mainly to create the Service Concession Reserve

from Unusable Reserves (£40 million), a long-term revaluation gain (£4 million) and bus lane enforcement income (£4 million).The balance of earmarked reserves as at 31

March 2024 was £79 million.

The Council has other usable reserves. These are the Capital Grants Unapplied Account with a balance of £11 million and the Capital Fund with a balance of £36 million.

These reserves are used to support capital investment. There is also an Insurance Fund that ensures there is sufficient funding to cover the Council’s insurance premiums.

The requirement to retain and manage financial reserves is a critical element of robust financial management and has a basis in statute. In setting its budget the Council

must take cognisance of this strategy. The uncommitted General Fund balance as at 31 March 2024 of £12 million is in line with recommended balances. A revised Reserves

Policy was approved for the year by Council on 1 March 2023, and details can be found in the Committee Papers of this date. Our reserves are detailed in Notes 5 and 6

on pages 76 to 81.

• Treasury

It is important in terms of investor confidence in Aberdeen City Council that the authority maintains its credit rating level. The rating is reviewed by Moody’s on an annual basis

and the assessment involves an analysis of the Council’s financial and institutional framework, as well as an assessment of the economic performance of Aberdeen and the

wider region. In terms of the economic analysis, independent economic commentary in this report will be used to not only support the Moody’s annual review, but also provide

the city with assurance on the medium-to-long-term economic outlook of Aberdeen and the region to existing and future investors.

In late October 2023, Moody’s downgraded the credit rating of all its rated local authorities, including Aberdeen City. The rating fell to A2, from A1, with an outlook of Stable.

The annual review meeting regarding the Council’s credit rating took place on 23rd February 2024, with no changes made to the credit rating at that time. In its latest credit

opinion, the credit rating agency Moody’s recognised the Council’s “strong institutional framework” and “strong track record of operating performance”.

The credit rating review followed the initial awarding of a credit rating in 2016, in advance of the successful £370 million bond issuance on the London Stock Exchange.

The Council’s Treasury Management Policy for 2024/25 to 2026/27 set the policies and boundaries for our investments and borrowings, with the stated investment priorities

being a) security of capital; and b) the liquidity of investments. Full details can be viewed at the ACC website in Committee Reporting for the Council Meeting on 7 February

2024.

• Revenue

For 2023/24, the Council set a net revenue expenditure budget of £661 million (being £559 million on the General Fund and £102 million on the Housing Revenue Account.

The performance during the year resulted in an operational deficit of £1.525 million as a result of a deficit on the Housing Revenue Account. The General Fund had a

balanced budget as at 31 March 2024. This reflects the service performance after year-end adjustments, such as the use of reserves and statutory funds, but excludes

statutory accounting adjustments such as revaluations, depreciation and IAS 19 adjustments and can be reconciled to the Expenditure and Funding Analysis (EFA) on page

82 and the Comprehensive Income and Expenditure Statement (CIES) on page 53.

The CIES statement has been prepared to the relevant accounting standards as adapted by the Code of Practice on Local Authority Accounting in the United Kingdom

2023/24. This means that final accounting adjustments have been made to the Council’s financial position in line with legislation.

Details of these accounting adjustments can be found in the Expenditure and Funding Analysis (EFA) which provides a reconciliation between the CIES and the Council’s

financial performance under the funding position as reported to Finance and Resources Committee on 8th May 2024. The EFA can be found at Note 7, along with an

analysis by type of the accounting adjustments. These adjustments include items such as depreciation, revaluations and IAS 19 Pension adjustments.

Aberdeen City Council Unaudited Annual Accounts 2023/24

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Statutory adjustments – these are accounting adjustments made to bring the Council’s reported financial results into compliance with the appropriate accounting standards

and the relevant legislation. These include Capital adjustments for depreciation, revaluations, impairments, concession arrangements, finance leases and capital grants.

They also include Pension adjustments for cash payments made to the pension funds and adjustments for actuarial valuations.

Other Adjustments – The other adjustments are those entries that require to be adjusted for. These are an adjustment for the debt instalment, the deferred premium interest,

the short-term employee benefits accrual, and the revenue contributions to capital.

The Council’s financial position compared to budget, excluding accounting adjustments is detailed below:-

Financial Performance 23/24

Quarter 4

Final

Position

Transfers

between

funds &

other

adjustments

(Surplus)/

Deficit per

EFA

Other

Adjustments

Statutory

Adjustments

(Surplus)/

Deficit per

CIES

£'000 £'000 £'000 £'000 £'000 £'000

General Fund 0 22,268 22,268 (10,045) 21,284 33,509

Housing Revenue Account 1,525 (13,825) (12,300) (2,425) 61,445 46,720

(Surplus) /Deficit on provision of services 1,525 8,443 9,968 (12,469) 82,729 80,228

Other Comprehensive Income and Expenditure (67,596)

Total Comprehensive Income & Expenditure Surplus 1,525 8,443 9,968 (12,469) 82,729 12,632

Aberdeen City Council Unaudited Annual Accounts 2023/24

Page 13

As at 31 March 2024

Budget

2023/24

Actuals

2023/24

Variance

(Actual -

Budget)

£000s

Children & Family Services

240,568

255,569

15,001

Resources

58,835

57,735

(1,101)

Customer

47,068

44,447

(2,621)

Commissioning

20,141

22,176

2,035

Integrated Joint Board

121,483

Total Functions Budget

488,096

501,410

13,314

Total Corporate Budgets

88,109

60,889

(27,221)

Total Net Expenditure

576,205

562,299

(13,907)

Sources of Income

(576,205)

(565,749)

10,456

Deficit/Surplus

(3,451)

Contribution to Capital & Insurance Fund

6,540

Contribution from Earmarked Reserves

(15,050)

Contribution to Earmarked Reserves

11,961

Deficit/(Surplus) after movement in Earmarked

Reserves and Statutory Funds

The Council spent £562.3 m in 2023/24 against a budget of £576.2 m generating a net expenditure surplus of £13.9m, after core funding is taken account of and relevant

transactions between the Revenue Budget and Reserves the overall operational position achieved was a ‘balanced budget’.

Across the whole range of Council services there was an overspent of £13.3 m, the largest of these was in Children & Family Services principally due to the service managing a

substantial increase in children that have arrived in the city over the last two years. This has been as a result of international students and their families and the number of

families in the city seeking refuge. This year has also seen an increase in costs of Out of Authority Placements and Kinship. Long term absence in teaching staff has contributed

to overspends.

Aberdeen City Council Unaudited Annual Accounts 2023/24

Page 14

The Commercial Property service income has not achieved its budget as there continues to be challenging market conditions for the leasing of property in the City. Property

costs were greater than planned due to the high costs of materials and labour for repairs and maintenance, which continues to focus on work being completed on a ‘wind and

water tight’ basis. Car parking income has partially recovered from the losses during the Covid pandemic due to an increased in the payment of fines but there remains lower

income from car parking permits. The cost of temporary accommodation (hotels, and bed and breakfast) is experiencing a significant rise in demand due to the cost of living

crisis and this is being exacerbated by fewer people moving into permanent accommodation.

There was an increase in income for museums, galleries and archives in 2023/24, after a few years struggling to recover from Covid, however the increases experienced in costs

used all of that additional income resulting in higher costs overall for service delivery. Furthermore the Beach Ballroom did not meet its planned income levels. Fees from

building warrant applications fell short of their budgeted levels, however fees from planning applications did achieve the levels expected. In the Integration Joint Board (IJB) the

costs of commissioned services were higher than budgeted for a range of reasons that will be included in the Aberdeen City IJB annual accounts, these additional costs are to

be met from IJB reserves. Additional income was raised from Bus Lanes enforcement, and the unspent value is retained as an earmarked sum in the usable reserves for specific

use on transport.

2022/23

2023/24

Number of children on school rolls

25,151

26,189

Number of refugees now settled in the community

683

1,497

Children & families seeking refuge from war in Ukraine

1,794

1,331

Out of Authority Placements

137

134

Number of homeless presentations

1,769

1,784

Commercial Properties to let

687

695

Temporary Accommodation- Hotels & Bed and Breakfasts

109

123

Art Gallery and Museums - no of events and exhibitions

203

178

Long term empty properties

2,507

2,803

Savings in Corporate budgets came from unused contingencies, lower capital financing costs as there was lower spend on capital projects, increased returns received on revenue

balances due to higher interest rates.

Core income received was £565.749 m, this was received from the General Revenue Grant, Council Tax Income, and Non-Domestic Rates and a Contribution from Reserves of

£14.629m. Funds will be transferred from Council Tax income to an earmarked reserve from additional income received for second and long term empty properties, which

supports the delivery of affordable housing in the City. There are a number of other transfers to Earmarked Reserves. Details of these can be found at Note 6.

• Capital

The Capital budget for the period 2023/24 to 2027/28 was set at £1,288 million (General Fund £732 million, Housing £556 million). Capital expenditure during the year was

£235 million, compared with anticipated expenditure for the year of £401 million. The capital programmes in 2023/24 were financed by capital grants (£20 million), borrowing

(£152 million), and other grant income / contributions (£63 million).

Spending of £235 million was recorded for the Capital Programme for the year, much lower than originally expected, which was a consequence of supply chain volatility but

also due to active and careful decisions taken to defer, pause and stop capital projects following a full review in the 2022/23. Pricing for contracts was extremely volatile

Aberdeen City Council Unaudited Annual Accounts 2023/24

Page 15

and substantially inflated ensuring the Council considered best value. The construction industry continued to experience shortages of products, raw materials, staffing and

logistical support across the UK. The Russian invasion of Ukraine in February 2022 and resulting economic sanctions placed on Russia and Belarus further exacerbated

supply chain issues for some commodities which were sourced from eastern Europe. Details of those projects that commenced, progressed or were completed during

2023/24 can be found on page 4.

• Group Accounts

The Aberdeen City Council Group consists of subsidiaries, joint ventures and associate companies that are combined with Aberdeen City Council to produce a group

balance sheet with total assets of £1.666 billion. This is an increase against the total assets of the Council, which are £1.663 billion, and is principally due to the inclusion

of the net assets of the Common Good and Trust Funds (the in-year performance of which are detailed below). Performance of subsidiary companies varied with a mixture

of surpluses and deficits reported in 2023/24. Details can be seen on pages 158-176.

• Common Good

The Common Good recorded an operating surplus of £1.814 million. This surplus is before revaluation of assets, investments and other accounting adjustments are applied.

The value of the Common Good is £118.177 million at 31 March 2024, a decrease of £1.45 million from last year, reflecting movements in the value of assets to reflect

current market conditions. Further details on the Common Good can be seen at pages 152-154.

• Trust Funds and Endowments

The Council administers a number of trust funds and endowments. Some of these have charitable status which requires separate accounts to be prepared and audited for

submission to OSCR (Office of the Scottish Charity Regulator). The value of all the Trust Fund balances at 31 March 2024 was £11.415 million, an increase of £0.401million

from last year. Further details on the Trust Funds and Endowments can be seen at pages 155 to 157.

Aberdeen City Council Unaudited Annual Accounts 2023/24

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Financial Indicators

The following financial indicators are intended to support interpretation of the Annual Accounts and the Council’s financial position and performance. They provide an indication

of the sustainability and affordability of the Council’s financial plans. Many of these are used by local authorities for benchmarking purposes.

Financial Indicator 2023/24 2022/23 Description

£'000 £'000

Financial Management

Actual net expenditure as a % of Council Revised

Annual Budget

100.00% 96.51%

This is the General Fund net expenditure (before statutory adjustments and transfers to

statutory funds) as a proportion of the Revised Annual Budget

Movement in the uncommitted General Fund Balance £0.0 m £0.0 m

Reflects the extent to which the Council has increased its Uncommitted General Fund

Reserve

Reserves

Usable reserves as a % of council annual budgeted net

revenue

27.82% 20.87%

This ratio shows the proportion of the Council's Usable Reserves in relation to the net

revenue budget

Uncommitted General Fund Balance as a % of council

annual budgeted net revenue

2.15% 2.21%

This ratio shows the proprtion of uncommitted General Fund Reserve balance in relation

to the budgeted net revenue

Debt & Borrowing

Capital Expenditure

General Fund 112,343 128,126

This is the amount spent on the General Fund capital programme for the year

HRA 119,903 114,447

This is the amount spent on the Housing capital programme for the year

Total 232,246 242,573

General Fund 7.68% 6.99%

This is the interest costs of the General Fund Debt in relation to the General Fund net

Revenue Stream

HRA 13.29% 9.12%

This is the interest costs of the Housing Revenue Account in Relation to its Gross

Income

Capital Financing Requirement

General Fund 1214115 1,171,938

HRA 404187 312,070

Total 1,618,302 1,484,008

Gross Borrowing 1,556,154 1,370,746

The amount of short and long term borrowing as at 31 March 2024

This is a measure of the capital expenditure incurred historically by the Council that has

yet to be financed.

Ratio of Financing Costs to Net Revenue Stream

Aberdeen City Council Unaudited Annual Accounts 2023/24

Page 17

Outlook including Risks and Uncertainties

Outlook for the City Council

a. Challenges from the rising cost of living and falling living standards

Just as the uncertainty and effects of the Covid pandemic on people and the economy were starting to ebb, the Russian invasion of Ukraine, inflation pressures and rising

borrowing costs brought about a potentially bigger challenge for the country. Inflation peaked at 11.1% (CPI) in October 2022, and remained high in 2022/23 sitting at 10.1% in

March 2023. The rate of inflation (CPI) has now dropped to 3.2% as at March 2024. Pressures have been experienced in the supply chain as a result of the Russian invasion

impacting on such materials as steel, grain etc, adding to the inflation mix. In response to this the Bank of England raised the Bank Base Rate and interest rates increases

followed, although these have plateaued at 5.25% in the second half of the year. The “Cost of Living Crisis” continues to affect our citizens as rising inflation impacts on fuel,

energy bills and everyday shopping costs and the Council has continued to take action, including setting aside £1m to support anti-poverty initiatives in 2024/25. The prevalence

of strike action being taken across the country has been inescapable as employees have been looking for pay to rise in line with inflation, generally unaffordable to employers

and the public sector. Holding back inflation busting pay awards is a part of managing inflation, reducing the ability for discretionary spending.

The budget for 2024/25 has been set based on what was known and anticipated to happen regarding costs and demand, however, much is uncertain including the time it will

take to reset and reduce the financial pressures back to long-term targets. The Council continues to work to understand the impact of these new and emerging pressures on the

budgets and is working on the Medium-Term Financial Strategy to be presented to Council in August 2024.

b. Financial sustainability

On 23 August 2023, the Council approved the Medium-Term Financial Strategy for the General Fund, that set out the funding context, the medium-term outlook and the impact

of capital investment and funding. Several scenarios and responses were developed and principles relating to financial sustainability and managing reserves. The Strategy

noted that while the Scottish Resource Budget is increasing up to 2027-28, in both cash and real terms, it is not expected to rise at the same rate as the spending bill, creating a

growing funding gap over time. From the Strategy the scenario plans revealed a budget gap range for 2024-25 of between £18m and £73m, with a central scenario of £43m.

The Council decided at its meeting on 14 December 2023 to increase rents in 2024/25 by 4.7% on the Housing Revenue Account, following rent having been increased by 4% in

2023-24 after being frozen for two years (2021/22-2022/23). The increase was below recommended levels with the Council accessing HRA reserves to fund the difference for 2024-

25, a review of the 30-year financial model and business plan for the HRA has been instructed and will be presented to Council by the end of September 2024.

The General Fund budgets and Common Good budget were set on 6 March 2024. The 2024-25 General Fund budget presented proposals to address a significant gap of £25.3m

to Elected Members. The gap is proposed to be met by redesign of Council services to address demand, in line with a commissioning led approach as described in the report. The

Council agreed a freeze in Council Tax and a rise in fees and charges, where appropriate. The budget report and minute sets out the detailed proposals, risks, and assumptions

behind the future financial proposals. The Common Good is to distribute over £4m during 2024-25.

The Capital budget for the period 2024/25 to 2028/29 was set at £1,287m (General Fund £800m, Housing £487m)

Taking account of the challenges and strategic context, with particular emphasis on the emerging fiscal and economic challenges, it is clear the scale of service redesign will

have to increase as we continue our journey of transformation, responding to a changing world by embracing new ways of doing business, meeting changing needs of customers

and communities. Response to the challenges ahead takes more than can be delivered by the Council alone and therefore the transformation portfolio of the Council is part of a

whole system, that includes multi-agency transformation and Council business efficiency.

We’re achieving our financial sustainability by building upon our systemic redesign of services to ensure we respond to and shape future demand. Themes include:

- Reshaping our workforce - The overall purpose is to continue to transform the culture of the organisation by stretching the aims articulated in the TOM to align organisational

culture with the ethos of the 21st Century Public Servant, whilst managing an approach to headcount reduction through service redesign and reshaping the remaining

workforce both in terms of skills, way of working and culture. To achieve this, we will draw on the feedback and experience of staff gained during the pandemic through

in-depth engagement with front line colleagues; we will continue to modernise our structural processes, thus creating an environment in which employees have clarity

Aberdeen City Council Unaudited Annual Accounts 2023/24

Page 18

of expectations and have the skills and confidence to deliver services that meet the needs of the citizens of Aberdeen in the 21st Century whilst at the same time feeling

empowered to support and challenge their colleagues to do the same.

- Reshaping our estate – Working to establish how the Council and partners can best use their asset base to efficiently deliver services and support wider transformation

aims. The Council holds significant physical resources, and, through the implementation of an updated Estate and Asset Strategy, including a Schools Estate Plan, we

will continue to work to optimise the use of our assets, including rationalisation and a review of assets with communities, to maximise utilisation within a reduced footprint.

By its nature, the estate should react to the requirement to deliver services and interact with other transformation programmes.

- Reforming how we work through digital - Digital and data have been, and remain, fundamental in both leading and enabling the continuing transformation of the organisation.

The work will develop and provision the foundational technologies, infrastructures, systems, and skills that will enable and underpin service designs and transformations,

taking full advantage of opportunities presented through the rapid acceleration of digital technology, the availability and management of data and how this can support

both planning and transactional services for our customers.

- Empowering citizens - Our continued ambition centres around the empowerment, independence, and self-serving ability of our citizens. We continue to challenge the cut-

off points between the customer and service delivery function, ensuring a single point of accountability for the customer experience empowered to drive more customer

centric behaviour. Our approach to improved outcomes is focused on customer relationships and is based on the following 4 themes: Demand Prevention; Integrated

Digital Access; Proactive Customer Engagement; and Embedded Customer Centric Culture.

c. Environmental Sustainability

As part of the approval of the Council Energy and Climate Routemap on 6 May 2020, a Council Energy and Climate Plan was instructed. On 28 February, 2022 Council set the

Net Zero Aberdeen route map which sets a net zero target for Aberdeen City by 2045. Scrutiny will be through the Council’s Climate Change Report, produced annually to meet

requirements of Public Bodies Climate Duties and an update was provided to the Net Zero, Environment and Transport Committee on 31 October 2023.

As detailed in the Council Delivery Plan (Council, 6 March 2024) the strengthened alignment of the commissioning intentions to support the Council’s priorities of addressing

climate change by reducing Aberdeen’s carbon emissions by at least 61% by 2026 and adapting to the impacts of our changing climate are highlighted.

The two significant local drivers behind Net Zero Aberdeen and Aberdeen Adapts are the Economic Policy Panel’s recommendations and Moody’s credit rating, the recent

assessment of which noted that for overall environmental risk, Aberdeen scored neutral to low (E-2), reflecting low exposure across all categories, but a moderately negative

exposure to carbon transition risks given the significant dependence of the city on the oil and gas sector, an issue which this route map sets out to address.

Outlook for the City

• Aberdeen Economy – General

Aberdeen is at the heart of one of the most prosperous regions in the UK outside of London. Comparatively, economic activity in Aberdeen and the North East is high due to a

host of factors including the concentration of activity for the Energy Sector. Gross value added (GVA), productivity, disposable income levels, house prices and commercial

property returns are significantly higher than Scotland and UK averages, however it has faced several challenging years. Last year, the Aberdeen Economic Policy Panel noted

the rate of employment in the region had dropped at a steeper rate than in the rest of Scotland. This has begun also to recover in 2023 but is still behind pre-pandemic levels.

Further, North East homeowners have seen house prices fall and renters have seen rents increase at steeper rates than the national average. This is an export-led economy

with the city region making a disproportionately positive contribution to Scottish exports demonstrating the international reach of the city region.

The diversity of the economy provides significant opportunities for investment and business growth in both the short and longer term. The strength of the recovery in Aberdeen

City depends upon the recovery in the energy sector where the outlook continues to evolve. In the longer term the transition to Net Zero is both a challenge and an opportunity

for the sector.

The population is still projected to grow over the next 35 years, and this has informed the preparation of the statutory Aberdeen City and Shire Strategic Development Plan for

the region, and Aberdeen Local Development Plan for the city. This will obviously increase demand on a range of Council services, including roads, education, and social care,

as well as partner services such as health but will also provide us with new opportunities to grow our business and income base and further strengthen Aberdeen’s position as

Aberdeen City Council Unaudited Annual Accounts 2023/24

Page 19

an economic anchor in the wider UK. The housing developments referred to above will be required if this projected population growth comes to fruition and we are actively

looking at how we can facilitate this continued demand pressure by generating new income streams and growing our financial strength and sustainability. The Council has

prioritised Prosperous Economy as one of the key themes of the Local Outcome Improvement Plan and Policy Statement, with the sub themes of investment in infrastructure,

inclusive economic growth, innovation, and internationalisation. The importance of supporting wider community and economic regeneration to the success of achieving the

Council’s wider outcomes is a key principle, with the Target Operating Model building cohesion through the Strategic Place Planning and City Growth functions. The Council’s

investment in its capital programme directly supports diversification of the city region economy, including tourism, events, leisure and culture, and the delivery of the City Region

Deal commitments on roads, Aberdeen harbour expansion and digital infrastructure.

• Economic Recovery

Aberdeen’s economic performance has been adversely affected by the pandemic, the Russian invasion of Ukraine, and the rise in energy prices, due to the sector mix of the

local economy. Factors critical for the long-term success of the region include economic diversification, skills, infrastructure investment and energy transition.

A recent assessment of the Economic Outlook for Scotland can be found in ‘'Sixth Medium Term Financial Strategy” published by Scottish Government on 25 May 2023. It

quotes:

“The financial situation is, amongst the most challenging since devolution. Following on from a decade defined by UK austerity, over the past three years Scotland has faced a

succession of economic shocks, with the Covid pandemic, the war in Ukraine, and the recent period of high inflation all driving significant pressures on the economy, society and

the public finances.

We are living through the biggest fall in living standards in decades, with the Scottish Fiscal Commission forecasting that average real disposable incomes are not set to recover

to pre-pandemic levels until around 2026-27.”

The independent Aberdeen Economic Policy Panel produces an annual report on the state of the Aberdeen Economy. It was published in January 2024 and stated that “…whilst

starting from a strong base, with GVA and average earnings levels higher than the national figures, [the North East] has faced particular acute challenges in recent years. For

example, average real wages declined faster and further in the North East than they did nationally throughout 2022 and into 2023, only beginning to recover in mid-2023.”

“Worker productivity, once the highest in Scotland, has been falling in recent years. Real GVA per head in the North East stood at £31,586 in 2021, the lowest it has been since

2005, bar 2020. Last year, the Panel noted the rate of employment in the region had dropped at a steeper rate than in the rest of Scotland. This has begun also to recover in

2023 but is still behind pre-pandemic levels. Further, North East homeowners have seen house prices fall and renters have seen rents increase at steeper rates than the national

average. Before the pandemic, the employment rate in the region was 80%, with 258,000 employed. It dropped to 74% during the pandemic, leaving 236,000 employed. As of

2023, it has recovered to 78%, with 256,000 people employed

”

“The Panel notes that business confidence, which had been deteriorating throughout 2022, has rebounded in 2023 to a modest level of positivity in Scotland and the UK, although

this remains below pre-pandemic averages. The key concern for businesses is cost inflation

. However, the North East continues to demonstrate a degree of resilience. A higher

proportion of businesses feel their turnover will improve in the next 12 months (62%) compared to the UK (53%). More than a third of companies (35%) in the North East report

that domestic sales have been increasing, in line with the UK average. And whilst 23% of UK businesses reported a decline in sales in the last three months, only 15% of

businesses said the same thing in the North East. 35% of North East businesses have seen an increase in international sales, outpacing the national average (27%). 24% of UK

companies saw a decline in export activity in the quarter, compared to just 13% in the Aberdeen region. Future overseas order pipelines are also stronger in the North East (30%

vs 27%)

”

North East Performs, October 2023

The Institute of Chartered Accountants, Q2, 2023

AGCC Quarterly Economic Survey 2023, Q2

Aberdeen City Council Unaudited Annual Accounts 2023/24

Page 20

The Policy Panel conclude that “…the macroeconomic outlook remains challenging and is likely to remain so for the foreseeable future. There is little that Aberdeen can do to

change that. Where local policymakers can have – and have had – the greatest influence is over the longer-term strategic approach for the region. Key to this long-term success

will be diversification, a commitment to making Aberdeen an even more attractive place to live, work, invest and set-up a business, securing a successful transition to renewable

energy and developing the core building blocks of a successful regional economic strategy (including skills and infrastructure).”

Supporting Recovery

During 2023/24 the Council adopted the Local Development Plan, this represents Aberdeen City Council’s land use strategy for Aberdeen for 10 years from 2022. Its aim is to

support the Council’s vision of creating a sustainable and socially equitable future for the city, as the home to its residents, as the regional centre of the North East, and as one

of Scotland’s most important economic engines.

The Council has continued to deliver on key infrastructure in the City to support recovery and make changes that will positively impact our citizens, businesses and visitors.

Completion of the Energy from Waste facility, in collaboration with Aberdeenshire and The Moray Councils, opens up new possibilities in respect of energy off-takes and the

journey to net zero. Furthermore the Council has committed to investment in the city centre in support of economic recovery. The Council capital programme and housebuilding

programme demonstrates significant investment in providing employment, business opportunities and improved living standards. A reports to Council on 14 December 2022 on

City Centre Masterplan, Aberdeen Market, Queen Street, and the Streetscape programme progresses strategic work streams with a programme of works which in the long term

support the recovery of the city, progress has been reported to Council regularly throughout the year.

The Council successfully introduced a scheme in 2023/24 to support empty shop units in Union Street being brought back into use, and has extended this scheme into 2024/25

with increased funding.

The approval of Aberdeen City Council entering into a Joint Venture with bp International Limited to deliver the Aberdeen Hydrogen Hub (AHH) Strategic Partnership will also

facilitate recovery. The vison for the AHH aligns with the UK Government’s recent UK Hydrogen Strategy publication which sets out the approach to develop a thriving low carbon

hydrogen sector in the UK with an ambition to generate 5GW of renewable and low carbon hydrogen by 2030 and the Scottish Government’s Hydrogen Policy Statement and

Draft Hydrogen Action Plan, which both pitch Scotland to become a leading hydrogen nation in the production of reliable, competitive, sustainable hydrogen.

Conclusion

The Council reports a credit rating of A2 stable, now two ‘notches’ below UK Sovereign rating following the collective review of all local authority ratings in quarter 3 by Moody’s. The

assessment of Aberdeen City continues to highlight “a strong institutional framework” and “a strong track record of operating performance” and thereby demonstrating external

assurance on the financial governance and strength of the organisation.

The 2023/24 financial year results showed a balanced operational budget for the General Fund and an overall small deficit of £1.525 million for the year. This shows another strong

performance over what has been yet another exceptional year and demonstrates the Council’s financial resilience and actions taken to maintain longer term stability in service delivery

going forward.

This has been an extremely challenging year, with the Council continuing feel the enduring effects of the pandemic, deal with the consequences from the Russian invasion of Ukraine,

and the further impact of the Israel-Gaza war, including the resettlement of thousands of people. The Council has continued to plan for financial settlements for Local Government

that will not increase funding to core services while at the same time react and adapt to inflation and interest rate pressures and the consequences for our people who continue to

cope with a cost-of-living crisis. The Council governance arrangements for responding to the changing environment, and specific financial resilience plans we have evidenced our

response to manage and mitigate risks in a robust way to protect the sustainability of Council finances throughout 2023/24 and into the future.

The approved Medium Term Financial Strategy signals the availability of funding and the risk and uncertainty of the operation environment in the future, this will guide the Council on

the actions needed to transform the organisation, to remain within its means.

In the midst of these extreme pressures difficult decisions have to be made and priorities prioritised if the financial balance is to be found going forward. We intend to continue to

invest in our staff and the infrastructure of the city in a financially sustainable way, the changes to the Council that are now aligned to the Target Operating Model (1.2) give us a

strong direction for the future. Investment in providing an economically diverse and culturally rich environment, we believe, will continue to make Aberdeen a location of choice.

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Acknowledgement

The production of the Annual Accounts is very much a team effort involving many staff from across the organisation, as well as those in the wider Aberdeen City Council group. We

would like to take this opportunity to personally acknowledge the considerable efforts of all staff in the production of the 2023/24 Annual Accounts to shortened timescales.

Jonathan Belford CPFA Angela Scott Councillor Christian Allard Councillor Ian Yuill

Chief Officer – Finance Chief Executive Co-Leader of the Council Co-Leader of the Council

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Statement of Responsibilities

The Council is required to:

• make arrangements for the proper administration of its financial affairs and to secure that the proper officer of the Council has the responsibility for the administration of

those affairs (section 95 of the Local Government (Scotland) Act 1973). In this Council, that officer is the Chief Officer - Finance.

• manage its affairs to secure economic, efficient, and effective use of resources and safeguard its assets.

• ensure the annual accounts are prepared in accordance with legislation (The Local Authority Accounts (Scotland) Regulations 2014), and so far, as is compatible with

that legislation, in accordance with proper accounting practices (section 12 of the Local Government in Scotland Act 2003); and

• approve the annual accounts for signature.

I confirm that these Annual Accounts were approved for signature by the Council at its meeting on ?.

Signed on behalf of Aberdeen City Council

Councillor Christian Allard Councillor Ian Yuill

Co-Leader of the Council Co-Leader of the Council

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The Chief Officer – Finance’s responsibilities:

I am responsible for the preparation of the Council's Annual Accounts in accordance with proper practices as required by legislation and as set out in the CIPFA/LASAAC Code

of Practice on Local Authority Accounting in the United Kingdom (the Accounting Code).

In preparing the Annual Accounts, I have:

• 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 local authority Accounting Code (in so far as it is compatible with legislation).

I have 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 financial statements give a true and fair view of the financial position of the Council and its group at the reporting date and the transactions of the Council and its

group for the year ended 31 March 2024.

Jonathan Belford, CPFA

Chief Officer – Finance

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Annual Governance Statement

1. INTRODUCTION AND SCOPE

1.1 A governance framework has been in place at Aberdeen City Council for the year ending 31 March 2024 and up to the date of approval of the annual accounts.

1.2 The purpose of this Statement is to report publicly on the extent to which the Council’s governance arrangements are compliant with our Local Code of Corporate

Governance 2022-2027 and to provide assurance on our internal control structure. This Statement when compared to those from previous years demonstrates that

our governance framework is up to date and improving.

1.3 The system of internal control is a significant part of that framework and is designed to manage risk to a reasonable level. It cannot eliminate all risk of failure but aims

to provide reasonable and not absolute assurance of effectiveness. The system of internal control is based on an ongoing process designed to:

• identify risks to the achievement of the Council’s outcomes;

• evaluate the likelihood of those risks being realised and the impact should they be realised;

• manage those risks efficiently, effectively and economically.

1.4 The Council has an approved Local Code of Corporate Governance. The Code sets out our commitment to the seven principles recommended in the CIPFA /

SOLACE Framework 2016. The Code cites the primary sources of assurance against each principle which demonstrate the effectiveness of our systems of internal

control.

Principle A Behaving with integrity, demonstrating strong commitment to ethical values, and respecting the rule of law

Principle B Ensuring openness and comprehensive stakeholder engagement

Principle C Defining outcomes in terms of sustainable economic, social and environmental benefits

Principle D Determining the interventions necessary to optimise the achievement of the 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

Principle G Implementing good practices in transparency, reporting, and audit, to deliver effective accountability

2. STRATEGIC COMMISSIONING APPROACH

2.1 Our governance arrangements supported delivery of the Council’s overall strategic commissioning cycle during 2023/24 and are embedded in the Critical Path.

2.2 In March 2023, the Council Delivery Plan 2023/24 aligned the Council’s priorities to Aberdeen City’s Local Outcome Improvement Plan, the Council’s Policy

Statement, the Council’s Strategy Framework and the Council’s legislative duties. As such it is a key component of our strategic planning approach.

2.3 The Delivery Plan was underpinned by the Population Needs Assessment – this provided data on people, place and economy which in turn informed our priorities,

including the Council’s approach to preventing demand on our services through early intervention. The Council’s priorities were then aligned against the Local

Outcome Improvement Plan’s stretch outcomes and thereby set the baseline for commissioning intentions. Within the approved annual budget were a set of service

standards, thus ensuring that the agreed levels of service to be delivered are affordable and reflect the demand for those services.

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2.4 The Medium Term Financial Strategy (MTFS) is aligned to the Council Delivery Plan. This was approved by Council in August 2023, provides an overview of the

Council’s financial position, and sets out a range of principles for income, expenditure and capital investment that are designed to support financial resilience and

financial sustainability.

2.5 The Council’s transformation creates a future environment for which the Council will operate, outlining our approach to service redesign, that enables future budget

gaps to be closed. Taken together, the MTFS and transformation represent the fiscal framework for the Council. The transformation programme has been developed

to align with the MTFS, and, as well as supporting the delivery of the required savings articulated in the MTFS, the programme supports the implementation of the

Council Delivery Plan.

2.6 As part of the Council’s continued transformation, the organisational structure was reported to Council in February 2024, proposing changes to the way in which

specific Clusters and services are managed and delivered, making recommendations for new alignments as part of our agreed next iteration.

3. GOVERNANCE ENVIRONMENT

Elected Member Decision-Making

3.1 The Committee structure, below, was reaffirmed in June 2023 with minor changes made to the Terms of Reference. The Committee diary was approved in August

2023 and meetings were held as scheduled with the addition of five adjourned Council meetings, a requisitioned Council meeting and five meetings of the Urgent

Business Committee.

Council Delivery

Plan

Council's

Transformation

Programme

Medium-Term

Financial

Strategy (MTFS)

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3.2 Each committee received an Annual Effectiveness Report assessing adherence to the Terms of Reference and including data on member attendance, referrals to and

from other committees/Council, late reports and approval of officer recommendations. All reports were reviewed by Council in February 2024 (deferred from

December 2023) to ensure oversight of the effectiveness of its delegations to committees.

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3.3 Additional opportunities for cross-party working were identified in furtherance of the recommendations from the Council’s 2017 and 2021 Best Value reports, including

a Voids Sub-Group and cross-party work on financial settlements and budget setting. The Governance Reference Group also met during this period, to review the

Council’s Scheme of Governance.

3.4 In addition to the above Committee structure, regular meetings are held between the Chief Executive and all political groups as well as independent members. The

Council’s administration group (‘the Partnership) senior leaders meet with the CEO weekly and meet monthly with the Corporate Management Team (CMT) to review

political priorities and progress with Council actions against committee business planners. In addition, all committee convenors regularly meet with the respective

executive lead for the committee.

Officer Decision-Making

3.5 As the Council’s Head of Paid Service, the Chief Executive’s (CEO) delegations are articulated within the Powers Delegated to Officers and given effect through

officer decision-making structures at all levels of the organisation. In 2023/24, the below structure was in operation to support the CEO discharge the Head of Paid

services responsibilities. Terms of Reference for the Corporate Management Team (CMT) and these officer only Boards were agreed and kept under review.

Extended CMT (ECMT) held collaborative weekly touchpoints to progress shared corporate priorities and to achieve shared situational awareness on single services

issues, as well as monthly meetings with ALEOs.

3.6 Commissioned by the Corporate Management Team, the executive boards govern and drive the delivery of the Council Delivery Plan, the MTFS, and the Council’s

transformation, through the strategic commissioning approach. Over the course of 2023/24:

• Strategy Board undertook analysis against priorities, legislation, etc agreed the future commissioning intentions and monitored the delivery of

outcomes relate to in-year decisions from previous commissioning cycle activity.

• Performance Board monitored agreed in-year service standards, instigated evaluations and improvement where required and reviewed and set

future service standards.

• Transformation Board delivered the transformation programme, delivering the requirements for the MTFS. It also reviewed Council design and

instigated further cross-functional redesigns and commercial opportunities. This included exploring redesign opportunities in relation to ALEOs.

• Risk Board provided scrutiny and assurance on internal controls and ensured deliverability of services within a heightened risk environment.

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3.7 In addition, a number of control boards have operated during the year to support the above governance:

• Establishment Control Board -

• Demand Management Control Board -

• Capital Control Board -

3.8 The Control Boards provided scrutiny on all Council spend and assurance that Council policy and practice was adhered to and that we are providing best value whilst

working within the available financial envelope.

Scheme of Governance

3.9 The Council’s governance framework relies upon clear, transparent structures for both elected member and officer decision-making. The Scheme of Governance, first

introduced in 2019, was updated in June 2023 following its annual review by officers and members. This is the mechanism by which:

• duties and powers vested in the local authority (the Council) are delegated to committees or to named Council officers;

• controls are placed on council officers to ensure their adherence to financial and procurement regulations;

• procedure at Council and Committee meetings is regulated; and

• members and officers relationships are regulated in alignment with the Councillors’ Code of Conduct and the Employee Code of Conduct, including

a mechanism for escalation where required.

3.10 The suite of documents which make up the Scheme of Governance were reviewed in June 2023 using the cross-party Governance Reference Group to develop

proposals for approval by Council. The changes agreed are summarised below:

Committee Terms of Reference

To ensure that they reflect the general operation of all committees over the previous year. Revisions were mostly minor in nature, with the most significant change

being to remove all references to the Council approving commissioning activity in excess of £1million which was transferred to the Finance and Resources Committee

to sit with oversight of other procurement activity.

Powers Delegated to Officers

To ensure that the document is reflective of current and pending legislation, as well as operational practice. The review also identified any additional changes that

would enable operation of the respective areas to be undertaken in a more effective manner and improve the operational delivery to internal customers and citizens.

Standing Orders

To ensure that any areas for clarification raised at, or in relation to, meetings since February 2022 had been considered, the relevant Standing Order was updated.

More significant changes included the introduction of a deadline for submission of motions/amendments by members, however this remains on a ‘should’ rather than

‘must’ basis and when reasonably practicable to adhere to. A mandatory deadline for the submission of final balanced budgets was added, to sit alongside a new

Budget Protocol which is detailed below. A further revision encouraged members to submit questions to officers in advance of Committee meetings in order to

promote effective management of agenda items. Other revisions were less significant in nature.

Financial Regulations

The requirements of the Following the Public Pound Code were added as well as reference to the Subsidy Control Act 2022. The Chief Finance Officer’s limit for debt

write off was increased from £25,000 to £50,000 to reflect inflationary and cost of living increases. Other revisions were relatively minor in nature.

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Procurement Regulations

Reviewed in the context of revisions to other parts of the Scheme of Governance and to ensure that the Regulations are in line with the Procurement Manual, relevant

legislation and operational practices.

Member Officer Relations Protocol

To ensure realignment to the Guiding Principles and Capability Framework and to emphasise the role of the Monitoring Officer and the possible escalation routes for

both officers and members who breach the protocol.

A new Budget Protocol was introduced in June 2023 with a view to improving the process for annual budget setting

across both member and officer areas of responsibility. The purpose of the Protocol was threefold:

• to enhance Council’s compliance with the Public Sector Equality Duty by aligning Integrated