The council is required to produce an Annual Governance Statement in line with the Local Authority Accounts (Scotland) Regulations 2014:
- Regulation 5(2) requires that an authority must conduct a review at least once in each financial year of the effectiveness of its system of internal control.
- Regulation 5(3) states that the findings from the review at 5(2) “must be considered at a meeting either of the local authority or of a committee of the local authority whose remit includes audit or governance functions”.
- Regulation 5(4) requires that following consideration of the findings of the review referred to in regulation 5(3) that authority or committee must approve an annual governance statement, prepared in accordance with proper practices in relation to internal control.
- Regulation 5(5) states that the annual governance statement must be signed by the Chief Executive and Leader of the Council.
The Annual Governance Statement is required to outline the council’s governance arrangements for the last financial year and demonstrate how the council complies with the principles of good governance in practice. The principles of good governance in the public sector are defined by the International Framework: Good Governance in the Public Sector which was jointly developed by the Chartered Institute of Public Finance and Accountancy (CIPFA) and the International Federation of Accountants (IFAC). The International Framework offers the definition that:
- “Governance comprises the arrangements put in place to ensure that the intended outcomes for stakeholders are defined and achieved.”
The fundamental function of good governance is to ensure that governing bodies (and individuals working for public sector entities) achieve their intended outcomes while acting in the public interest at all times. Acting in the public interest implies primary consideration of the benefits for society, which should result in positive outcomes for service users and other stakeholders, and requires:
- Behaving with integrity, demonstrating strong commitment to ethical values, and respecting the rule of law.
- Ensuring openness and comprehensive stakeholder engagement.
In addition to the overarching requirements for acting in the public interest (as noted in principles A. and B. above), achieving good governance also requires effective arrangements for:
- Defining outcomes in terms of sustainable economic, social, and environmental benefits.
- Determining the interventions necessary to optimise the achievement of the intended outcomes.
- Developing the entity’s capacity, including the capability of its leadership and the individuals within it.
- Managing risks and performance through robust internal control and strong public financial management.
- Implementing good practices in transparency, reporting, and audit, to deliver effective accountability.
The principles in the International Framework have been interpreted for the local government environment. This is set out in the Delivering Good Governance in Local Government: Framework (2016) and accompanying Guidance Notes for Scottish Local Authorities (2016) which was published by CIPFA in association with the Society of Local Authority Chief Executives (SOLACE):
- The Delivering Good Governance in Local Government: Framework details the 7 principles within the International Framework along with a set of 21 supporting sub-principles and 91 examples of behaviours and actions which are considered to demonstrate good governance in practice.
An Addendum to the Delivering Good Governance in Local Government: Framework (2016) was published by CIPFA in May 2025, for application to annual governance statements for 2025/26 onwards. This represents the first update since 2016 and replaces the chapter of the Framework in relation to annual review and reporting. The remainder of the 2016 Framework, including the 7 principles of good governance (with the 21 supporting sub-principles and 91 examples of behaviours and actions) remains unchanged.
To reflect and clearly incorporate the key components introduced by the Addendum (2025), the Annual Governance Statement for 2025/26 has been reframed accordingly. This includes the introduction of an executive summary providing assurance on the core arrangements in place across each of the seven principles of good governance (A to G).
In practice, governance comprises the combination of structures, strategies, policies, plans, frameworks, systems, processes, rules, codes, procedures, cultures, and values that are used to direct, control, and manage a local authority’s operations and activities. This includes political, economic, social, environmental, legal, and administrative structures and processes, and other arrangements, as encapsulated in the principles defined in the Delivering Good Governance in Local Government: Framework (2016). These define roles and responsibilities and accountabilities, and establish mechanisms to enable a local authority to pursue its vision effectively and ensure that the vision is underpinned with control and the management of risk. The list of items referred to in this paragraph are hereinafter referred to as elements and mechanisms. Through these elements and mechanisms, the overall aim is for the council to ensure:
- Resources are directed in accordance with agreed policy and according to priorities, and in line with corporate project management procedures.
- There is sound and inclusive decision making.
- There is clear accountability for the use of those resources in achieving defined outcomes for service users and local communities.
The purpose of the Annual Governance Statement is therefore to report publicly on the extent to which the council’s arrangements are consistent with the principles in the Delivering Good Governance in Local Government: Framework (2016) and its Addendum (2025). This includes how the governance arrangements have been monitored and evaluated over the year, and any planned improvements for the year ahead.
The Annual Governance Statement in this document comprises the following sections:
- Section 1: Executive summary - to bring together the key messages and conclusions of the Annual Governance Statement, including whether governance arrangements are fit for purpose, operate effectively, and support the achievement of the council’s priorities while outlining key improvements and future priorities.
- Section 2: Scope of responsibility - to ensure that there is a sound system of governance in place.
- Section 3: The local context - which takes into account the economic, social, and environmental context within which the council operates, including improvements made to support the achievement of the organisation’s strategic objectives.
- Section 4: Annual review - to assess the effectiveness of the council’s governance arrangements and systems of internal control, informed by 11 sources of assurance and incorporating improvements from current and previous years.
- Section 5: Certification of assurance - that sets out the level of assurance provided by the council’s governance arrangements.