Board Meeting Minutes

Meeting: Board of Scottish Canals

Date and Time: 23rd April 2020 at 10.00am

Venue: Video Conference

Present: Andrew Thin Chair Rob McGregor Board Member David Middleton Board Member Carolyn Sawers Board Member Catherine Topley Chief Executive Michelle Wailes Board Member

In attendance: David Blair Director of Policy and Governance Lindsey McNeill Director of Corporate Services Richard Millar Director of Infrastructure and Operations Nicola Christie Head of Legal Services – Secretary to the Board Jeanette Roberts Head of Health & Safety (item 11 only) Josie Saunders Head of Corporate Affairs Cath Mitchell Executive Assistant Wendy Nicol Canals Policy, Scottish Government (Item 7 onwards)

Apologies: Martin Ritchie Head of Ports, Shipping, Freight & Canals, Scottish Government

Item Topic Action By / When

1. Welcome and Apologies

1.1. The Chair welcomed everyone to the meeting.

1.2. The Chair commended the commitment of the Executive Management team and Scottish Canals staff to address the challenges of the covid-19 lockdown whilst delivering on key business issues.

1.3. The Chair proposed that the comprehensive written reports for each agenda item be taken as read and that the meeting focus on matters requiring a Board decision.

2. Declaration of Interests

1.2 As required by the Ethical Standards in Public Life etc. Act 2000, Board Members are asked at all meetings to highlight any declarations of interest which may give rise to any conflict with any items on the agenda.

2.2 There were no declarations of interest.

3. Approval of Previous Minutes

3.1. The Board considered and approved the draft minutes of the Board meeting held on 12 March 2020.

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Item Topic Action By / When

3.2. The Board ratified the minutes of the urgent board decision taken by phone and email on 21 and 22 March 2020 in response to the covid-19 outbreak recommending the closure of all non- essential operations for an undefined period pending further advice from the Scottish Government.

4. Matters Arising and Review of Previous Actions

4.1 Scottish Canals maintains an action log of all key decisions and actions arising from the Board meetings. This ensures that requests can be actioned in a timely fashion by the correct individual. The Board agreed that the following actions should be closed having been satisfactorily discharged:

4.1.1 The ARC Chair to report to the March Board following a scheduled meeting with the current co-opted member.

4.1.2 The Board to be updated at its meeting in March 2020 regarding progress to address the current Health & Safety resource issue.

4.1.3 The Board to review the Business Plan 2020/21 at the Board meeting on 12 March 2020.

4.1.4 A progress update on the transition to SG budgeting and new accounting treatment to be reported to the Board at its meeting on 12 March 2020.

4.1.5 Clarification of any impact on the accounting treatment of the outstanding debt arising from the lease of the Canal-side holiday cottage portfolio as a result of the SG transition project to be reported to the Board.

4.1.6 A project options review for the Barr’s Community Hub project at Lock 16 on the Forth & Clyde canal to be reported to the Board at the Board meeting on 12 March 2020.

4.1.7 A project options review for phase one of the Carse Outdoor Hub development, renamed the Treehouse, to be reported to the Board meeting on 12 March 2020.

4.1.8 The Cabinet Secretary to approve the finalised Corporate Plan 2020/23 prior to the Scottish Canals Board meeting on 12 March 2020.

4.1.9 Scottish Canals’ to publish its Board Papers on its website from the commencement of the financial year 2020/21.

4.1.10 The Board to be advised on the highlighted discrepancy between the UK Great Travel Company bad debt provision and that reported in the Administrator’s plan.

4.1.11 The Board to be consulted on Board meeting locations well in advance of Board meetings

4.2 The Board noted that reporting on progress of the following remaining outstanding actions was included in various agenda items to be discussed during the meeting, and the report on

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Item Topic Action By / When

actions from previous meetings would be updated to reflect these discussions:

4.2.1 The Corporate Risk Register to be reviewed further at the next Board meeting.

4.2.2 The Board to be updated on the review of the current Corporate and Operational Governance arrangements at the Board meeting in April 2020.

4.2.3 The quarterly Business Report to include additional narrative on red KPIs and high risk assets.

4.2.4 The Board to be advised of any adjustment to the anticipated year end surplus as part of the current monthly budget reporting to the Board.

4.2.5 The Executive Management Team to actively progress options to facilitate canal access to the local community in the vicinity of Boroughmuir High School on the Union Canal this financial year and update the Board on progress in the Q4 Estates, Commercial and Operations Report.

4.2.6 A review of the longer-term options for the portfolio of holiday cottages and boats progress to be reported to the Board in the Q4 Estates, Commercial and Operations Report.

4.2.7 The Board to be updated on progress to deliver the Scottish Canals Health & Safety Action Plan 2019/20 at the next Board meeting.

4.2.8 The Business Plan 2020/21 and high-level operating Budget 2020/21 to be reported to the next Board meeting.

4.2.9 A report on the year end financial position as agreed with Scottish Government to be reported to the next Board meeting.

4.2.10 An update on the review of financial skills and competencies to support Scottish Canals as a NDPB to be reported to the next Board meeting.

4.2.11 The potential future litigation issue with HMRC regarding their assessment of Scottish Canals’ VAT recovery position to be added to Scottish Canals’ Corporate Risk Register.

4.2.12 The Board and SG to be kept updated on progress of the VAT assessment issue with HMRC.

4.2.13 An update on the Sighthill Enterprise Wharf to be reported to the next Board meeting.

5 Audit & Risk Committee Chair Report and (i) ARC Minutes 26-03- 2020 draft

5.1 The Board noted the focused written report from the ARC Chair together with the draft minutes of the ARC meeting held on 26 March 2020 informing the Board on issues considered by the

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Item Topic Action By / When

ARC.

(ii) Internal Audit Plan 2020/21

5.2 The Board considered the content and expected outputs of the draft Internal Audit Plan 2020/21. The Board noted that the plan would be kept under review as some of the audits included in the current plan may be superseded by other areas of higher risk due to covid-19. Following the recommendation of the ARC, the Board approved the Internal Audit Plan 2020/21.

(iii) Amended Internal Audit Plan 2019/20

5.3 The Board ratified an amendment to the Internal Audit Plan 2019/20, as recommended by the ARC, to include a review of financial planning.

(iv) Complaints Handling Procedure

5.4 The Board approved the recommendation of the ARC to adopt the two part model complaints handling procedure in line with the model Complaints Handling Procedure as published by the Scottish Public Services Ombudsman for implementation by Scottish Canals in its entirety.

5.5 The Board noted that a link to the Unacceptable Behaviour policy would be included within the procedures and that the Corporate Affairs team would convert the draft documentation into a user friendly, Scottish Canals branded document prior to publication on the web-site.

ACTIONS:

a) A link to the Unacceptable Behaviour policy to be included in the Complaints Handling Procedures. Head of Legal b) The Complaints Handling Procedures to be converted into a Services/Head of user friendly, Scottish Canals branded document prior to Corporate Affairs publication on the web-site.

6 Business Continuity

6.1 The Board acknowledged the significant impact of covid-19 on the day-to-day operations and delivery of Scottish Canals. The Board reviewed and confirmed their satisfaction with the approach the Executive Management Team have taken and the ongoing response to covid-19, including amended approval processes, as summarised in the Board report. The Board noted that prudent, cautious planning regarding people, operational and financial issues was in place, with regular discussions and sharing of this with Transport Scotland.

7 Business Plan 2020/21 and Budget 2020/21

7.1 The Board noted that, given the rapid pace of change due to the impact of covid-19 and the current shutdown of all activity across the canal network, the initial content and format of the Operational Business Plan 2020/21 had been simplified to track revised activities against original stated aims.

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Item Topic Action By / When

7.2 The Board considered the revised Operational Business Plan 2020/21 supported by the initial detailed Budget plan and a covid-19 impact assessment. The Board was assured by the implementation of a thorough Budget planning process, demonstrated by the robust management of Budget allocations and supported by a budget holders training programme.

7.3 The Board noted that the Budget 2020/21 should be linked to a third party and Joint Venture funding strategy. The Board further noted the need to adapt based on the covid-19 impact assessment, setting out the likely impact on Scottish Canals operational model over assumed scenarios as indicated to Scottish Government.

7.4 The Board approved the Operational Business Plan and Budget 2020/21 in its revised format. The Board acknowledged the need to robustly monitor and regularly review the Operational Business Plan and Budget 2020/21 in light of fluid covid-19 developments and Scottish Government guidance. The Board would be regularly updated.

ACTION:

c) Updates on the revised operational Business Plan and Director of Corporate operating Budget 2020/21 to be reported to the Board Services regularly.

(i) Capital Budget 2020/21

7.5 The Board reviewed the proposed investment plan for the £12.2m Scottish Government capital grant allocation prior to seeking ratification from the Scottish Government. The Board noted the significant planned programme of canal infrastructure improvements in line with the Asset Management Plan. The Board further noted the business needs requiring the allocation of capital grant to Business Development objectives.

7.6 The Board discussed the challenges and risks of the planned Enterprise Resource Programme to be undertaken in partnership with the Scottish Government Digital Transformation team to unlock revenue for core investment. The Board was assured that the appropriate governance and controls were in lockstep with Scottish Government outcomes and that the risks would reflect Scottish Canals risk appetite statements (currently under review).

7.7 The Board discussed concerns that the present covid-19 shutdown may delay the capital investment programme due to access restrictions for site investigations.

7.8 The Board approved the proposed £12.2m capital investment programme, subject to Scottish Government ratification as required, to enable the proposed projects to be rapidly progressed. The Board would be kept updated should Scottish Canals be required to amend the investment programme in light of the covid-19 shutdown. The Board would review the Capital Budget 2020/21 investment programme at the July Board meeting.

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Item Topic Action By / When

ACTION:

d) The Board to be kept updated should Scottish Canals be required to amend the capital investment programme in Director of Infrastructure light of the covid-19 shutdown. and Operations

e) The Board to revisit and review the Capital Budget 2020/21 investment programme at the July Board meeting.

8 Governance Review

8.1 The Board noted progress on a proposed revised internal governance structure, having taken into account feedback from the ARC. The governance review had re-modelled finance, investment and project governance arrangements with clear, transparent processes and documentation to support assurance and audit requirements, aligned with new requirements under the Scottish Public Finance Manual.

8.2 The Board supported the proposed internal governance structure to instil appropriate disciplines and behaviours in the decision making process. The Executive Management team was encouraged to continue to refine the governance structure and streamline, if appropriate. The Board noted that the governance arrangements of Scottish Canals’ Joint Ventures and arms- length charitable trust would be integrated within the revised internal governance structure.

ACTION:

f) The governance arrangements of Scottish Canals’ Joint Director of Policy & Ventures and arms-length charitable trust, to be Governance integrated within the revised internal governance structure.

(i) Scottish Canals Framework Document and Grant in Aid 2020-21 Funding Letter Update

8.3 The Scottish Canals’ Framework Document had been revised to reflect Scottish Canals’ change of status to a Non Departmental Public Body (NDPB) with effect from 1 April 2020. Scottish Canals Grant-in-Aid offer of funding letter 2020-21 had also been issued.

8.4 Clarification from Scottish Government was awaited following proposed amendments to reflect Scottish Canals’ continuing requirement to act commercially to ensure strong financial sustainability, and a revised delegated authority limit of £250k for new Joint Ventures and new projects within existing Joint Ventures.

(ii) Delegated Authorities Update

8.5 The Board reviewed and approved the updated Financial Delegated Authority (FDA) list to reflect current authorisation levels in line with the revised Framework Document. The FDA would be circulated to all relevant staff and regularly reviewed in

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Item Topic Action By / When

line with audit recommendations.

ACTION: Director of Corporate g) the updated Financial Delegated Authority list to be Services circulated to all relevant staff and regularly reviewed.

9 Q4 Business Report

9.1 The Board noted the Q4 Business Report for the period from 1st January 2020 to 31st December 2020 together with the key issues raised.

9.2 The Board noted progress during Q4 to deliver the Business Plan 2019/20 objectives and performance against Key Performance Indicators (KPIs). The Board acknowledged that the covid-19 lockdown, which was beyond the control of the Executive Management team, had and would continue to frustrate delivery of Business Plan objectives, such as seasonal recruitment. Budget uncertainty and wider strategic issues around the organisation’s move to a new accounts direction had resulted in an increased number of red and ambers KPIs. A report reviewing overall performance during 2019/20 would be produced for review at a future Board meeting.

ACTION:

h) A report of overall performance during 2019/20 against Chief Executive/Director the Business Plan objectives and Key Performance of Policy & Governance Indicators to be review at a future Board meeting.

10 Q4 Finance and Performance Review Report

10.1 The Board considered the Q4 Finance and Performance Review Report for the period from 1st January 2020 to 31st March 2020. The Board received regular reporting of the management accounts and noted the satisfactory financial position achieved at the end of Q4.

10.2 The Board was updated on current key issues and noted agreement with Scottish Government in relation to the Year End financial position.

10.3 The Board further noted that preparations for operating under the Scottish Public Finance Manual and FReM had progressed resulting in an agreed reporting format for the Annual Report & Accounts 2019/20, supported by the external auditors.

10.4 The Board was advised that there were a number of points that both HMRC and Scottish Canals were seeking to clarify regarding HMRC’s assessment of Scottish Canals’ VAT recovery position. The timescale of continuing discussions with HMRC had been impacted due to the covid-19 situation, as other HMRC priorities had taken precedence. A contingent liability provision would be recognised within the year end accounts following discussions with external audit.

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Item Topic Action By / When

10.5 Following the implementation of Covid-19 restrictions, both Treasury and Scottish Government had issued guidance in relation to supporting employees, suppliers, and tenants. In relation to procurement activities, specific guidance was issued in relation to offering relief within the supply chain. The Procurement, Finance and Executive teams assessed those suppliers currently under contract and paid invoices in line with Scottish Government guidance.

(i) Financial Reporting Action Plan Update

10.6 The Board noted progress on the financial reporting action plan. To underpin the financial reporting action plan, internal audit had undertaken an audit of systems and processes which provided reasonable assurance and recommended areas of improvement to be addressed by the internal training plan.

10.8 The Board was updated on the performance of the finance function with specific reference to ongoing mentoring and skills & competencies training in relation to operating as a Non Departmental Public Body. The Remuneration Committee to be updated on the outcome of initial discussions with external advisors to scope out an independent analysis of the financial skills and competencies required to support Scottish Canals as a NDPB.

ACTION:

i) An update on the outcome of discussions with external Director of Corporate advisors regarding the financial skills and competencies to Services support Scottish Canals as a NDPB to be reported to the Remuneration Committee.

11 Q4 Health & Safety Report

11.1 The Board supported a safety first culture and welcomed Jeanette Roberts, Head of Health & Safety, who summarised the Q4 Health & Safety report for the period from 1st January 2020 to 31st March 2020. The Board was fully briefed on the investigation of the one RIDDOR reportable incident during Q4 and was assured that lessons learned were being implemented.

11.2 Covid-19 restrictions had led to the Health & Safety Leadership & Worker Participation Workshops, scheduled for mid-March, to be deferred. The feasibility of presenting the workshop remotely was being explored. In the interim, with all but essential staff working from home, good use of ICT systems was ensuring the maintenance of effective communications with colleagues.

11.3 To raise mental health awareness NHS-funded training was planned for Line Managers in Q3. Practical help and guidance had also been provided via a mental health and wellbeing group set up within Yammer.

11.4 The Board was updated on specific issues relating to covid-19 and was assured that risk assessments were in place to clarify

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Item Topic Action By / When

guidance on lone working, social distancing and PPE requirements to ensure staff welfare. Practical advice from the Health and Safety Executive was also being shared to reinforce key guidance. Extensive planning of an exit strategy from the current lockdown was underway based on updates from Scottish Government.

12 Q4 Asset Management Report

12.1 The Board noted the Q4 Asset Management Report summarising the activities carried out during the period from 1st January 2020 to 31st March 2020 towards delivery of a significant works programme in the 2019/20 financial year. The projects delivered, specifically the completion of the gate replacements at Fort Augustus and the third phase of embankment improvements at Linlithgow, were fully aligned with the Asset Management Strategy and Scottish Government capital and revenue spend expectations. The Board recognised the challenges of limited revenue spend on canal maintenance going forward in difficult economic circumstances relating to the covid-19 pandemic.

12.2 Critical works such as water control, safety checks and residential customer services were continuing under a permit process and working practices had been fully risk assessed and revised to take account of Covid-19 precautions. The Board was briefed on the planning for the opening of the canals in accordance with Scottish Government guidance which would be key to support local economies. The Board recognised that behaviours may change in the new normal with an increase in walking and cycling which was in line with Scottish Canals’ active travel agenda.

12.3The Board noted the increase in litter and fly-tipping on the towpaths and social distancing issues specifically on the towpaths in urbanised areas which was being managed by proactive communications in line with Scottish Government guidelines.

13 Q4 Estates, Commercial and Operations Report

13.1The Board noted the Q4 Estates, Commercial and Operations Report for the period from 1st January 2020 to 31st March 2020.The Estates and Regeneration budget had delivered a positive contribution in line with the business plan whilst destinations had had a challenging year. The operating models of Scotland’s canals had been significantly changed to reduce spend.

13.2 The emergence of the Covid-19 pandemic during Q4 of 2019/20 had a significant effect across the estates, destinations and operational portfolios. Construction works on a number of regeneration projects had been safely and swiftly closed down with resultant costs. The Executive Management Team was fully focussed on mitigating and managing the situation, however, losses were anticipated to increase significantly during Q1 and Q2 of 2020/21.

13.3 Works were progressing during lock-down, focusing on maximising opportunities for remote working, undertaking a review of operational compliance, monitoring and mitigating operational risk across the canal network within the current restrictions and planning for a safe re-opening of the canal network.

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Item Topic Action By / When

13.4 The Board noted significant movements following the full year Book Asset Valuation (BAV). A report on the BAV process would be reported to the ARC to provide assurance regarding the accounting impact of the increased asset values in addition to ensuring that Scottish Canals was horizon scanning commercial market conditions to inform its asset management strategy.

ACTION:

j) A report on the BAV process to be reported to the ARC on the accounting impact of the increased asset values in Director of Infrastructure addition to ensuring that Scottish Canals was horizon and Operations scanning commercial market conditions to inform its asset management strategy.

14 Q4 Communication and Engagement Report

14.1 The Board noted the communications, marketing and stakeholder engagement activity undertaken in Q4 and that all planned events were on hold. An all staff change programme was ongoing to address the issues raised in the staff survey and lead on staff engagement initiatives.

14.2 The Board noted the exemplary communications in response to the covid-19 lockdown. Scottish Canals was delivering against a communications plan setting out the frequency, means and content for engaging with staff, customers and partners. In addition, a covid-19 hub had been created on the Scottish Canals’ website featuring FAQs, Scottish Canals’ updates and an online for deferred payment requests. Following requests from a number of boating customers, councillors and other stakeholders to limit towpath usage, Scottish Canals had created a series of posters for busy locations urging people to stay at home. Additional material had been distributed across the canal network urging people to following government guidance.

15 Corporate Risk Register Report

15.1 The Board noted that the impact of covid-19 on staff, customers and the business and the potential future litigation issue with HMRC regarding their assessment of Scottish Canals’ VAT recovery position were significant increasing risks which had been escalated to the Corporate Risk Register. It was noted that a continuity process was in place in the event of the absence of key personnel. The Board was assured that corporate risks were being monitored and mitigated in addition to key operational risks managed at departmental level.

15.2 The Board was further assured that the Corporate Risk process review, informed by the internal audit of risk management and with expert input from Rob McGregor, was ongoing. Workshops were planned to propose amendments to the current risk appetite/policy, the risk assurance map, in addition to a review of the Corporate Risk Register and the identification processes to improve management of the underlying causes of risks.

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Item Topic Action By / When

15.3 The recruitment of a Corporate Risk, Compliance and Business Continuity Manager had successfully concluded. Pauline McMillan who had public sector experience in business continuity, compliance and corporate risk would join Scottish Canals on 22 May 2020.

16 Any Other Business

16.1 The Board discussed the need for flexible, timely Board/Remuneration Committee decision making to ensure the Board was fully sighted on strategic issues in these fast-moving unprecedented circumstances.

16.2 The Board agreed that frequent, shorter meetings to address key strategic issues should be planned for the foreseeable future in addition to regular quarterly Board review meetings to ensure transparent and accountable governance.

16.3 The Board agreed that the frequent Board/Remuneration Committee meetings would be minuted for transparency and audit purposes but should be less resource intensive with the focus on immediate strategic issues. Reports and attendance would be limited to Executive Management team members as required.

16.4 The ARC quarterly meeting timetable would be retained and issues reported to the Board as required.

ACTION:

k) The Board to be advised of the revised Board meeting Secretary to the Board timetable.

Date of Next Meeting

The next quarterly Board meeting will take place on 23rd July 2020 in addition to frequent, shorter Board meetings to address key strategic issues to be advised.

Signed ……………………………………. Date ……………………………………

Andrew Thin Chair

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Original Date Date Raised Director Context Action Detail Responsible Closed Comments Order Required

150 24/06/2019 Chair Investment Scottish Canal’s approach to investment in the context of public value expectations to be CT/AT 23/06/20 Meeting with Cabinet Secretary was rearranged to 23rd April 2020. Management discussed with the Cabinet Secretary for Transport, Infrastructure and Connectivity at the This has now been put on hold due to covid-19 lockdown. Strategy meeting planned for 24th September 2019. 183 23/09/2019 Company Secretary Corporate The risk appetite to be published on the website coterminous with the publication of the Board NJC 23/06/20 Risk Appetite review deferred to June Board meeting Governance reports. 184 28/11/2019 Chief Executive Corporate The Corporate Risk Register to be reviewed further at the next Board meeting. DB 23/04/20 Corporate Risk Register review update on the agenda Governance Rob McGregor to work with the Chief Executive to improve the risk identification processes and lead the annual risk identification review to be undertaken at the January Board meeting.

199 19/12/2019 Chief Executive Corporate The Board to be updated on the review of the current Corporate and Operational Governance DB 23/04/20 Governance Review on the agenda Governance arrangements at the Board meeting in April 2020. 202 19/12/2019 Finance Financial The Board to be further updated at its meeting in June 2020 on the implementation of the LM 23/06/20 Board to be updated following ARC review of internal audit recommendations Reporting Financial Reporting Action Plan. 204 19/12/2019 Audit & Risk Committee Governance The Board to review and consider amended terms of reference for the ARC MW/NJC 23/06/20 Terms of Reference of comparable NDPBs to be reviewed. ARC Terms of Reference to be reported to June Board meeting. 205 19/12/2019 Executive Corporate Risk The Board to be updated on progress to mitigate the corporate risks identified at the next DB 23/04/20 Corporate Risk Register review update on the agenda Board meeting. 212 19/12/2019 Chief Executive Corporate A conference call to be arranged prior to the Board meeting with the Cabinet Secretary CM 23/06/20 This has been put on hold due to COVID-19 lockdown. Governance scheduled for 16th January 2020. 213 30/01/2020 Corporate Affairs Staff Engagement Staff survey feedback and details of the internal communications and engagement undertaken JS 23/06/20 Deferred until June board. to be reported to the Board at its meeting on 12th March 2020. 214 30/01/2020 Audit & Risk Committee Governance The ARC Chair to report to the March Board following a scheduled meeting with the current co- MW 12/03/20 12/03/2020 Completed opted member. 215 30/01/2020 Audit & Risk Committee Governance The ARC membership to be reviewed within the next 12 months and a recommendation by the MW 01/01/21 ARC to be reported to the Board. 216 30/01/2020 Director of & Health & Safety The Board to be updated at its meeting in March 2020 regarding progress to address the RM 12/03/20 12/03/2020 Completed Operations current Health & Safety resource issue. 217 30/01/2020 Chief Executive/Director Corporate The quarterly Business Report to include additional narrative on red KPIs and high risk assets. CT/DB 23/04/20 Included in Q4 Business Report of Policy & Governance Governance

218 30/01/2020 Director of Corporate Corporate The Board to approve the Business Plan 2020/21 at the Board meeting on 12 March 2020. LM 12/03/20 12/03/2020 Superseded by Action 714 Services Governance 219 30/01/2020 Director of Corporate Corporate A progress update on the transition to SG budgeting and new accounting treatment to be LM 12/03/20 12/03/2020 Completed Services Governance reported to the Board at its meeting on 12 March 2020. 222 30/01/2020 Director of Corporate Financial Clarification of any impact on the accounting treatment of the outstanding debt arising from the LM 12/03/20 12/03/2020 Completed Services Reporting lease of the canalside holiday cottage portfolio as a result of the SG transition project to be reported to the Board. 223 30/01/2020 Director of Corporate Financial The Board to be advised of any adjustment to the anticipated year end surplus as part of the LM Monthly On the agenda - Q4 Finance Report Services Reporting current monthly budget reporting to the Board. 224 30/01/2020 Chief Executive Corporate The Executive Management Team to actively progress options to facilitate canal access to the RM 23/04/20 On the agenda - Q4 Estates, Commercial and Operations Report Governance local community in the vicinity of Edinburgh Quay on the Union Canal this financial year and update the Board on progress in the Q4 Estates, Commercial and Operations Report.

226 30/01/2020 Chief Executive Corporate A project options review for the Barrs Community Hub project at Lock 16 on the Forth & Clyde DB 12/03/20 12/03/2020 Completed Governance canal to be reported to the Board at the Board meeting on 12 March 2020. 227 30/01/2020 Chief Executive Corporate A project options review for phase one of the Carse Outdoor Hub development, renamed the DB 12/03/20 12/03/2020 Completed Governance Treehouse, to be reported to the Board meeting on 12 March 2020. 228 30/01/2020 Chief Executive Estates A review of the longer-term options for the portfolio of holiday cottages and boats progress to CT 23/04/20 On the agenda be reported to the Board in the Q4 Estates, Commercial and Operations Report.

230 30/01/2020 SG Sponsor Team Corporate Plan The Cabinet Secretary to approve the finalised Corporate Plan 2020/23 prior to the Scottish MR 12/03/20 12/03/2020 Completed Canals Board meeting on 12 March 2020. 231 30/01/2020 Company Secretary Governance Scottish Canals’ to publish its Board Papers on its website from the commencement of the NJC 23/04/20 Ongoing financial year 2020/21. 232 30/01/2020 Director of Policy & H&S The Board to be updated on progress deliver the Scottish Canals Action Plan 2019/20 at the DB 23/04/20 On the agenda - Q4 Health & Safety Report Governance next Board meeting 233 30/01/2020 Director of Estates The Board to be advised on the highlighted discrepancy between the UK Great Travel DB 23/04/20 13/03/2020 Confirmation by email dated 13th March 2020 that the full amount of Scottish Infrastructure & Company bad debt provision and that reported in the Administrator's plan. Canals losses of £188k had been intimated to the Administrators through the Operations formal claims process. 234 30/01/2020 Director of Corporate Governance The Business Plan 2020/21 and high-level operating Budget 2020/21 to be reported to the CT/LMcN 23/04/20 On the agenda Services next Board meeting. 235 30/01/2020 Director of Policy & Comms CT/DB 23/06/20 Postponed to June board due to delay in Staff Working Group to meet in current Governance An action plan to address bullying and harassment to be reported to the next Board meeting. circumstances 236 30/01/2020 Director of Corporate Finance A report on the year end financial position as agreed with Scottish Government to be reported CT/LMcN 23/04/20 On the agenda - Q4 Finance Report Services to the next Board meeting. BM/04/APR/2020 Actions from Board Meetings - Update of progress to date File Last Updated: 15/04/2020 CM

Original Date Date Raised Director Context Action Detail Responsible Closed Comments Order Required 237 30/01/2020 Director of Corporate Finance An update on the review of financial skills and competencies to support Scottish Canals as a CT/LMcN 23/04/20 On the agenda - Q4 Finance Report Services NDPB to be reported to the next Board meeting. 238 30/01/2020 Director of Policy & Governance The potential future litigation issue with HMRC regarding their assessment of Scottish Canals’ DB 23/04/20 On the agenda - Corporate Risk Register Governance VAT recovery position to be added to Scottish Canals’ Corporate Risk Register. 239 30/01/2020 Director of Corporate Finance LMcN 23/04/20 On the agenda - Q4 Finance Report The Board and SG to be kept updated on progress of the VAT assessment issue with HMRC. Services 240 30/01/2020 Director of Policy & Regeneration The Board to be updated on progress of the options for disposal of the Barrs Community Hub DB 20/08/20 Governance Capital Grant project, Lock 16, Forth & Clyde Canal in the Q1 Estates, Commercial and Operations Report in Funding August 2020. 241 30/01/2020 Director of Policy & Regeneration DB 10/12/20 he Board to be updated on the re-evalution of the Barrs Community Hub project, Lock 16, Governance Capital Grant T Funding Forth & Clyde Canal at the Board meeting in December 2020. 242 30/01/2020 Director of Policy & Regeneration A review of the assumptions and financial postion of the Treehouse project, Carse Industrial DB 23/06/20 Governance Capital Grant Hub, Inverness to be undertaken and a recommendation reported to the Board meeting in Funding June 2020. 243 30/01/2020 Director of Policy & Regeneration DB 23/04/20 On the agenda - Q4 Estates, Commercial and Operations Report Governance Capital Grant An update on the Sighthill Enterprise Wharf to be reported to the next Board meeting. Funding 244 30/01/2020 Company Secretary Governance NJC/CM 23/04/20 On-going The Board to be consulted on Board meeting locations well in advance of Board meetings.

BM/05/APR/2020

SCOTTISH CANALS BOARD MEETING

Audit and Risk Committee (ARC) Chair Report

23rd April 2020

Purpose

To report to the Board the activity of the ARC.

Priority

Routine

Background

The key issues of the ARC meeting held on 26th March 2020 are summarised below and the draft minutes are attached as appendix 1.

Key Issues

Risk, Control and Governance 1.1. An update on the Governance review was provided and key issues discussed. The following Committee recommendations have been included on the Governance Review Update to the Board:

1.1.1. The Change Board function be absorbed into the Executive Management Team; and 1.1.2. Further consideration be given to including financial planning as a function of the Investment Board rather than formalising a separate Financial Planning Board.

1.2 An update on work in progress on the Corporate Risk process review was provided, in particular planned workshops and the recruitment of additional specialist risk management resource to facilitate the simplification and integration of the risk management framework and risk escalation process as a key element of the Governance review. The Committee provided feedback on the Risk Appetite Statements, Risk Assurance Map and Corporate Risk Register format. The outcomes and recommendations of the Corporate Risk process review will be reviewed at the next Committee meeting in June prior to recommending approval by the Board.

1.3 An update on the strategic five-phase plan to address a number of areas for improvement identified following an independent audit of Scottish Canals Business Continuity Plan (BCP) was provided. The Committee was also updated on key developments and dynamic BCP arrangements concerning the live BCP event in response to the COVID-19 pandemic.

1.4 An update on the asset management action plan was provided and key issues discussed with ARC. ARC were also advised that collaborative initiatives with Canal & River Trust (CRT) were ongoing, in particular lessons learned for reservoir maintenance following the CRT reservoir wall failure following the recent publication of an Independent review.

Internal Audit

1.5 The ARC reviewed recommendations and management responses of Internal Audit reports undertaken with regard to the following:

1.5.1 Risk management - scope for improvement was identified with one recommendation prioritised as high which management assured would be addressed as part of the Governance review;

BM/05/APR/2020

1.5.2 An establishment visit to the Egg Shed and Steamer Terminal - a limited level of assurance was placed upon the control environment with scope for improvement identified and five recommendations prioritised as two high, and three medium for management to address; and

1.5.3 Capital Project Review of Ardrishaig Pier - a limited level of assurance was placed upon the control environment with scope for improvement identified and nine medium priority recommendations for management to address.

1.6 The ARC reviewed the action follow up report and noted that eight recommendations were not yet implemented, two medium risks in relation to financial governance, a high and a low risk in relation to asset management and inspection and four opportunities for improvement in relation to Board operations. It was agreed that the management update on progress and revised implementation dates were acceptable.

1.7 The ARC considered the content and expected outputs of the draft Internal Audit Plan 2020-21 and recommends that the Board approve the draft Internal Audit Plan 2020-21 attached as appendix 2. For the 2020/21 audit plan, a flexible approach would be adopted. Some of the audits included in the current plan may be superseded by other areas of higher risk due to COVID-19.

1.8 The ARC recommends that the Board ratify an amendment to the Internal Audit Plan 2019/20, attached as appendix 3, to include a review of financial planning.

External Audit

1.9 The ARC was updated on progress of the External Audit for the financial year ending 31 March 2020 and noted that this would be kept under review in the current circumstances.

Policies and Processes

1.10 The ARC reviewed and approved the data protection policy and procedures.

1.11 The ARC agreed to recommend to the Board that it approve the adoption of the two part model complaints handling procedure, attached as appendix 4, in line with the model Complaints Handling Procedure published by the Scottish Public Services Ombudsman for implementation by Scottish Canals in its entirety by 1 April 2021.

Recommendation The ARC would ask the Board to note the summary and recommendations presented above.

BM/06/APR/2020 CORPORATE NOTING

EXECUTIVE DIRECTOR SPONSOR: Catherine Topley

Scottish Canals – Business Continuity

The Board should note that this paper was considered and agreed by the EMT at their meeting on 7 April 2020.

Purpose

COVID-19 has had a significant impact on our Country and such the day to day operations and delivery of Scottish Canals. This paper aims to summarise the approach taken by the EMT to date and update the Board on future activities.

Priority

Immediate. The impact on COVID-19 has impacted the initial approved budget, affordability and deliverability of the 2020/21 business plan.

Background

The ARC was provided with an update of the BC audit and approach taken to date in the ARC meeting on the 26th March 2020 (detailed in Annex A). Scottish Canals formally stood the organisation down on 23rd March 2020, following an email (with paper, and minutes approved in this meeting) exchange with the Board. Following the announcement from the UK Government and Scottish Government on the 16 April 2020 confirming that the restricted movements should remain in place for a further 3 weeks the staff have been notified that we will remain in the current working pattern for a further 3 weeks.

COVID19 was an unexpected business continuity event and as a result did not fit into the model scenarios prepared up until now. These include events such as single site lock down because of a suspicious package/possible terror incident and a serious flooding caused by a canal breach. Although COVID19 is visibly at the extreme end of ‘impact’ in terms of risk scoring, such an event has not been likely enough to warrant serious preparation before now by the organisation, considering its focus and operational characteristics.

Business Continuity Systems Scottish Canals have moved from the second ‘response phase’, with an increasing focus on the consolidation and stabilisation phase of the crisis having passed through pre-crisis. The next stages are: • Sustaining consolidation and stabilisation • Recovery • Return to normality • Post crisis

Communications have been essential to ensure shared situational awareness with wider our team and over the course of the 4 weeks we have ensured accurate, brief and clear communications that have built trust and support from our staff and stakeholders.

Key Issues

Detailed in Annex B is an update on COVID19 Planning and Actions undertaken by SC since COVID19 became a worldwide pandemic, and as such an UK strategic issue, the organisation has implemented the following decisions to maintain resilience.

The key strategic factors remain the same as previously presented:

 People; considerable time and effort has been put in place to ensure regular and effective communications are undertaken with staff and stakeholders. Our communications team continued to engage with the broader public and customer base with teasers on future engagement/attendance opportunities with Scottish Canals.  Strategy: As noted in this paper the Initial Business Plan has been revised to an Operational Business Plan to enable the EMT to respond in an agile way, adopting a considered approach public safety and confidence, asset safety and structure, finances, staffing, and timing.  Budget; The Initial budget that was approved and supported by the Board and Transport Scotland has been radically reviewed. Scottish Canlas has effectively been operating on a minimal expenditure model in the past 4 weeks and continues to do so with various models appropriate to the scenarios detailed above. These have been discussed and supported with Transport Scotland as our sponsor.  Finance; it is imperative to note that SC have continued to complete the transition from our previous account’s direction, worked with Scottish Government and Transport Scotland to finalise the previous funds in Scottish Canals accounts and continue to manage the end of year programme. This has not been without its challenges, which have resulted in the EMT supporting the need for further support to be provided to the SC finance team.

Corporate Implications

• Strategic Priorities: The delivery of the last two weeks of the 2019/20 financial year resulted in 7 projects being delayed by 2 months (+) to an estimated cost of £150k-£200k. The commencement of the new financial year business plan delivery has been impacted owing to the organisations inability to commence projects. As such an approach has been adopted to develop a six-week, six month and 12-month business plan that can be scaled dependant on the progress of the virus.

• Risk/Risk Appetite: Ongoing risk to the business, BCP arrangements are fluid and evolving in light of ongoing COVID19 crisis.

• Legal: Scottish Canals has reviewed its legal responsibilities and as such are continuing to manage water control, support and provide services to our tenants and are working with our commercial operators. The Coronavirus (Scotland) Act 2020 came into force on 7th April 2020. In summary the Act contains measures designed to ease the pressures of day to day business for public services - recognising the severe strain which may be placed on their resources during the current emergency. The EMT have been updated on the implications for Scottish Canals.

• Financial: Scottish Canals worked early with Transport Scotland and advised them as our SG sponsors of the worst/best case scenarios to the 2020/21 budget. Very worst case could see SC losing its entire retail, tourism and property income to the total of circa £5.5m. However, SC have curbed costs where possible working with Transport Scotland.

• Human Resources: Training and development requirement for SC Intelligence group and wider support structure including standby and emergency response teams

• Fair Work First: No employee is suffering financial detriment as a result of the COVID-19 period. Trade Unions are actively engaged in regular conversations about the organisation.

• Communication: BCP communicated effectively both internally and with external stakeholders

• Community & Third Sector: BCP to reflect engagement with Community and Third Sector interests

• Commercial: BCP will support continued commercial engagements

• Asset: BCP will support ongoing asset management and response to asset related issues

Conclusions and Recommendations

The Board are asked to review and confirm their satisfaction with approach the SC EMT have taken and the ongoing response to COVID19.

Author: Catherine Topley Title: Chief Executive Date: 31 March 2020

Annex A – BC paper to ARC 26 March 2020 Copy of the ARC paper AUDIT AND RISK COMMITTEE CORPORATE NOTING

EXECUTIVE DIRECTOR SPONSOR: David Blair, Policy & Governance Director

BUSINESS CONTINUITY PLANNING UPDATE

Purpose

This paper is to provide to the Audit and Risk Committee (ARC) an update on Business Continuity Planning arrangements within Scottish Canals.

Priority

Routine.

Background

PlanB audited Scottish Canals Business Continuity Plan (BCP) arrangements in May 2019 and submitted a gap analysis report with recommendations for improvement. This paper addresses the key issues identified and the Scottish Canals plan and progress with improvements.

This paper also summarises key developments and BCP arrangements concerning a live BCP even i.e. Coronavirus / COVID19 pandemic. This paper will be supplemented by a verbal update on COVID19 arrangements to reflect the rapidly changing external factors and operational implications.

Key Issues

Prior to the COVID19 pandemic, work on Business Continuity Planning concerned a low- intensity audit by PlanB of our planning and management arrangements and the implementation of key recommendations. These recommendations and observations have been grouped into Red, Amber and Green categories and are subject to ongoing implementation. The Committee are asked to consider the items below classed as ‘Red’ i.e. important / not yet fully delivered:

1. New SC BCP Template (ISO 22301) 2. Strategic SC BCP – Super Plan 3. Crisis Management Team 4. Strategic SC wide Business Impact Analysis (BIA) 5. ICT Plans – Loss of ICT, Disaster Recovery 6. Communication Plan – Process & procedure for how staff will be contacted during an incident 7. Annual exercise of BCP 8. Issues with 0800 number 9. Emergency Instructions updates

We have proposed the following strategic five-phase plan to address issues raised:

Phase One - Leadership

• Identify and develop Leadership Group to implement recommendations. o The following external support has been identified: ▪ Alan Simpson – West of Scotland RRP (On site 1 day CM1) ▪ Graham Offord – OffRisk (Under review) o Key target group (Engineering, H&S, ICT) o Jeanette Roberts, Head of Health and Safety (from 22/3/20) will coordinate COVID19 Gold, Silver and Bronze Command calls and information trackers. Jeanette to join the leadership team. o Risk, Business Continuity and Compliance Manager role advertised to recruit for a central coordination role to support this work at corporate level. Closing date 27/3/20. o Further members to be identified drawing on ‘what works’ as part of COVID19 management.

Phase Two – Processes and Standardised Forms

• Leadership team to develop industry standard templates for BIA and BCP. • BIA required for each HoS and will inform one simple Super BCP o BIA Template agreed and circulated to HoS • BCP to meet requirements of ISO 22301 o BCP Template in development • BCP to address o Evacuation details o Incident notifications o Communications o Invocation process o Logging o Reference to Crisis Management Team (Who, when, where, what) o Word format with version control o Reference to other plans / documentation ▪ ICT Loss ▪ ICT Disaster recovery ▪ Communications ▪ Emergency Instructions ▪ Other o Exercise arrangements

Phase Three – Populate Forms / Super Plan

• Leadership team and Heads of Service to prepare updated BIA in line with revised template o 10 of 14 Plans completed • Intelligence led team to prepare a strategic BCP for the business

o BCP still in development / re-prioritised to reflect COVID19

Phase Four – Build Organisational Capability

• Intelligence led team to develop and implement robust training and exercise program – linked to recruitment of Risk, Business Continuity and Compliance Manager. Estimated Summer 2020.

Phase Five – Evaluate

• External review. PlanB or other provider invited to objectives critique our implementation and response to COVID19.

Update on COVID19 Planning and Actions

The COVID19 was an unexpected business continuity event and as a result did not fit into the model scenarios prepared up until now. These includes events such as single site lock down because of a suspicious package/possible terror incident and a serious flooding caused by a canal breach. Although COVID19 is visibly at the extreme end of ‘impact’ in terms of risk scoring, such an event has not been seen as likely enough to warrant serious preparation before now by the organisation, considering its focus and operational characteristics.

Since COVID19 became a national strategic issue, the organisation has implemented the following decisions to maintain resilience. The significant daily cycle of external developments mean that this paper will be out of date as it is being read and it is important to consider this when arriving at any conclusions about the organisation’s preparedness and response.

• Operationally we have moved where necessary to cancel bookings across a range of services, offering re-booking opportunities or refunds as necessary – once the country moved formally to a lockdown phase. • We have rapidly built staff capability tools to support managers to keep track of decision relating to COVID19 and to support staff recently asked to work from home. This includes overhauling our teleconference and videoconference facilities. The prompt to make these more resilience has actually led to a lower unit cost model for digital communications by changing away from a traditional supplier. • We have reprioritised daily to reflect the latest Government advice to put safety first. This now includes deprioritising activities such as the collection of mail from offices which only days ago was considered to be a limited risk activity. • Other activities (e.g. paper based parts of expense-claims) have been rapidly moved onto a digital footing with GDPR and authority consideration being made in a timely and proportionate way – typically in lock-step or slightly in arrears and with follow-up activity to ensure effective audit of decisions. • We remain committed to the finalised Corporate Plan, approved at the March Board meeting. Our draft Business Plan and 2020 Budgets will however be substantially reviewed to reflect a near certain and severe drop in income and the absence for the most part of a recognisable summer season. The operational business is effectively staying in winter season mode. • Practically, there are a very small number of staff who are expected to leave their home to undertake unavoidable and critical tasks. This can be discussed verbally. All other staff are being accommodated to work from home with appropriate ICT equipment. It is clear some staff will have no effective role at home and a daily tracker of this (and other decisions and consequences of COVID19) is being implemented to give line of sight to such staff to allow for temporary redeployment. • Staff mental health is becoming a priority issue and a resource pack is being generated for issue shortly. This draws from good practice guidance being shared commonly by similar bodies. The value of regular human contact, even by telephone, and especially by line managers is recognised and this sort of contact is now a clear priority. To support this additional ‘face time’ with teams on a near daily basis, the Executive Team has agreed to suspend a number of recurring meetings from diaries (typically attended by the extended senior staff).

Corporate Implications

• Strategic Priorities: BCP is a strategic priority for the Safety Team; resources have been depleted over the last year with the role of Head of Health & Safety. With the exception of external delivery support we are progressing and this is fluid and evolving in light of ongoing COVID19 crisis. Priority at this time would be bringing in external support to develop the Leadership Team [phase one].

• Risk/Risk Appetite: Ongoing risk to the business, BCP arrangements are fluid and evolving in light of ongoing COVID19 crisis

• Legal: Ongoing legal requirement

• Financial: External support from WoS RRP has minimal cost other than staff time resource etc. Additional support from OffRisk if required would require additional funding

• Human Resources: Training and development requirement for SC Intelligence group and wider support structure including standby and emergency response teams

• Fair Work First: N/A

• Communication: BCP will need to be communicated effectively both internally and with external stakeholders

• Community & Third Sector: BCP will need to reflect engagement with Community and Third Sector interests

• Commercial: BCP will support continued commercial engagements

• Asset: BCP will support ongoing asset management and response to asset related issues

Conclusions and Recommendations

ARC to review and confirm satisfaction with the recommendations identified in Appendix 1

Author: J Burns-Sweeney Title: Health & Safety Advisor Date: 20/03/20

APPENDIX 1

Phase Action Detail Target / Progress 1 1.1 Identify Leadership Team Almost (Target Engineering, H&S, ICT) Complete 1.2 Develop Process and Standardised Forms 30/04/20 We are working with A Simpson of WoS RRP to run in- house training workshop to CM1 Additional support available via OffRisk 2 2.1 Develop BIA Template Complete Model template completed and circulated to HoS 2.2 Develop BCP Template 31/05/20 Under development 3 3.1 HoS to prepare updated BIA 31/03/20 10 / 14 completed to date 3.2 SC Intelligence to prepare simple strategic BCP 31/05/20 Under development 4 4.1 Develop robust training and exercise plan 31/05/20 Under development 4.2 Implement training plan 31/06/20 Under development 4.3 Implement exercise plan 31/07/20 Under development 5 5.1 External Review 31/10/20 TBC

Annex B - COVID19 Planning and Actions undertaken

• Scheduled daily Executive Team meetings to triage news from UK Government. • Invited subject matter experts/relevant team leaders to attend to advise on impact and options. • Moved formally to Gold/Silver/Bronze Command model of mostly daily meetings/calls to formalise cascade of decisions and build decision-making capability. Commands reflect relative leadership tiers i.e. Gold = Executive Team, Silver = Heads of Service, Bronze = Team Leaders/Line Managers. • Commissioned daily communications following Gold Command to all staff, all customers and generally via website and social media. • Tailored communication messages to each day’s clear priority – revising as necessary but minimising content/frequency to avoid overload. • Asking line managers to cascade key messages in person to ensure penetration to the whole organisation. • We have remained in close contact with Transport Scotland via our sponsor and Finance Business Partner and have acted in lock step with expectation around what stage the UK/Scotland is now engaged. • We have provided income budget/income modelling to Scottish Government via our sponsor and finance business partner on progressively extreme scenarios as part of wider planning to support effective national public service resilience planning. • Operationally we have moved where necessary to cancel bookings across a range of services, offering re-booking opportunities or refunds as necessary – once the country moved formally to a lockdown phase. • We have reprioritised daily to reflect the latest Government advice to put safety first. This now includes deprioritising activities such as the collection of mail from offices which only days ago was a limited risk activity. • Other activities (e.g. paper-based parts of expense-claims) have been rapidly moved onto a digital footing with GDPR and authority consideration being made in a timely and proportionate way – typically in lockstep or slightly in arrears and with follow-up activity to ensure effective audit of decisions. • We remain committed to the finalised Corporate Plan, approved at the March Board meeting. Our draft Business Plan and 2020 Budgets will however be substantially reviewed to reflect a near certain and severe drop in income and the absence for the most part of a recognisable summer season. The operational business is effectively staying in winter season mode. • Practically, there are a very small number of staff who are expected to leave their home to undertake unavoidable and critical tasks. All other staff are being accommodated to work from home with appropriate ICT equipment. It is clear some staff will have no effective role at home and a daily tracker of this (and other decisions and consequences of COVID19) has been implemented to give line of sight to such staff to allow for temporary redeployment.  Staff mental health is a priority issue and a resource pack is being generated for issue shortly. This draws from good practice guidance being shared commonly by similar bodies. The value of regular human contact, even by telephone, and especially by line managers is recognised and this sort of contact is now a clear priority. To support this additional ‘face time’ with teams on a near daily basis, the Executive Team has agreed to suspend several recurring meetings from diaries (typically attended by the extended senior staff).

 The UK Cabinet Office issued new guidance relating to payment of suppliers on 23 March 2020. (‘Procurement Policy Note - Supplier relief due to COVID-19 Action Note PPN 02/20 March 2020’). This was supplemented by Scottish Government Finance issuing ‘COVID-19 – Advice to SG Sponsored Bodies’ on 01 April 2020.This was a request to review payments to suppliers to ensure service continuity during and after the COVID-19 outbreak. • We have created a COVID-19 information hub, which houses various pages of information our different customer groups would find useful. https://www.scottishcanals.co.uk/our-response-to-coronavirus/. The hub outlines the most up to date corporate statement on COVID-19, with tiles that link to relevant information and resources. Several boaters and members of the public raised concerns regarding the towpaths, so we have included a page which focuses solely on towpath use. This includes our position of staying local and restricting towpath use, with a checklist we urge users to follow before considering using our towpaths. Within the hub there is a section for customers who may be facing financial difficulty at this time. This links to a specially created form which we are asking customers to fill out in order to best assess how we can help.

BM/07/APR/2020 ) CORPORATE MONITORING

EXECUTIVE DIRECTOR SPONSOR: Lindsey McNeill

BUSINESS PLAN 2020/21 AND BUDGET 2020/21 (AMENDED BUSINESS PLAN 2020/21) (AMENDED BUDGET 2020/21) (CAPITAL BUDGET 2020/21)

The Board should note that the content of this paper was considered by the Executive Management Team (EMT) on the 14 April 2020.

Purpose

This paper provides the Board with an overview of the initial Business Plan that was due to come to the Board prior to covid-19, and the revised Operational Business Plan for Scottish Canals, given the covid-19 situation (Annex A). It is supported by the initial detailed Budget plan (Annex B) and a revised summary impact assessment (Annex C).

Priority

Immediate. The information contained in this paper is responding to emerging issues and forms a baseline position for the organisation in the current climate and for the new financial year.

Background

Following the previous update to the Board, the planned approach to developing the Operational Business Plan was changed to reflect the impact of COVID-19, and the need to move to a shutdown period.

Given the rapid pace of change, the initial ambitious content and format has been changed to track revised activities against our original stated aims. This information is now held in Excel spreadsheets to allow for fluid recording and dynamic assessment by the CEO and Directors on a weekly basis. The new format in its baseline form is shown in Annex A.

As identified previously, the Grant-In-Aid allocated to Scottish Canals from the Scottish Government consists of a Resource Grant (Revenue) of £8.5 million, and a Capital Grant of £12.2 million.

Key Issues

The Operational Business Plan is not in the original planned format; however, it meets the changing business needs in a fluid situation. The EMT have undertaken scenario planning at six weeks, three months, six months and 12 months; and the Heads of Service are capturing information on a weekly basis. There is also a multi-disciplinary team looking at developing a ‘start up plan’ once the COVID-19 restrictions are relaxed / lifted.

Scottish Canals have modelled a worst case, medium and best-case scenario. Working on the worst case scenario, we have baselined the assumption that no commercial income is going to be received, that we meet all our internal and external contractual commitments, and there may be scope to bring some planned maintenance and engineering projects forward in the current year associated with the capital GIA.

Discussions are ongoing with our sponsor regarding Scottish Canals’ ability to support and develop current and future commercial activities. Discussions with the Sponsor Team were undertaken with the Chair and CEO on the 08 April 2020 following receipt of Scottish Canals Framework Agreement and GIA letter. At this meeting, it was agreed a further review of the wording was required and a consolidated position regarding the categorisation of Canal assets agreed.

In the immediate future, the Operational Business Plan captures Scottish Canals’ statutory obligation to keep the canals safe through water control and safety checks, and to support residential boaters with diesel and pump-out services. The Operational Business Plan focuses on ensuring that core corporate delivery is still delivered where possible on time, noting adaptations where required, e.g. year-end activities, Business Plan development & implementation; and ensuring all employees are encouraged to bring skills and knowledge up to date through e-learning and seminars, as well as generating web content for the public.

The initial budget allocation has also been revised in light of COVID-19 and the restrictions on what we can deliver in the foreseeable future. This is covered in more detail in Annex B (Original Budget) & Annex C (Revised Budget).

For Board tracking / audit purposes, we have also captured the impact of the COVID-19 against our original planned objectives.

Corporate Implications

 Strategic Priorities: This Operational Business Plan was originally planned to deliver measurable progress against the three-year Corporate Strategy 2020/2023. Physical shut down has limited the organisation’s capability to fully deliver these within this current year. Discussions are being undertaken regarding how Scottish Canals are able to identify alternative ways during this period, but may have a long term impact across the three year period.

 Risk: Depending on the duration of the COVID-19 situation and subsequent recovery period, there is a risk that the business is unable to deliver the three-year strategic priorities. There is an additional risk in relation to how Grant-in-Aid can / may be deployed, and what the wider public sector need to reclaim in order to meet the costs associated elsewhere with COVID-19. Additionally, the operating costs for Scottish Canals requires the commercial returns/profits from our businesses, and as such Scottish Canals are engaging with Transport Scotland to keep them aware of this and potential cost implications/overspend which are currently being assessed.

 Legal: There are no direct legal implications arising from this update paper, however should the fundamental operating model of Scottish Canals need to change either due to COVID-19, or restrictions within the Grant-in-aid allocation, there may be potential legal repercussions in relation to SC role within legislation, delivery of contracts, and employment contracts.

 Financial: Ability to operate in a ‘business as usual’ capacity means that budget allocation has had to be reviewed in light of what is possible to deliver during the COVID-19 era. Additionally, following conversations with SG and Transport Scotland, there needs to be more work undertaken in relation to all commercial aspects of Scottish Canals’ work.

 Human Resources: The impact of COVID-19 has had significant impact on our people, both in relation to ability to undertake their roles, but also on their physical and mental wellbeing. The degree of uncertainty about changing what we can do operationally has required significant challenges and opportunities. This new Operational Business Plan is a positive tool to encourage joint working opportunities, time for upskilling and time for reviewing operating practices. However, there are issues with people not being able to work to full capacity due to restriction.

 Fair Work First: A positive aspect of this change to Operational Business Plan is that all staff are being actively encouraged to undertake training opportunities and be involved in cross-organisational development opportunities. No employee is suffering financial detriment as a result of the COVID-19 period. Trade Unions are actively engaged in regular conversations about the organisation.

 Communication: This plan has been extensively consulted with internal teams, but this will have potential repercussions on our delivery to a range of stakeholders. These communications are fluid and tailored to each stakeholder group as appropriate.

 Community & Third Sector: There are impacts arising from this report. The unknown duration of the COVID-19 situation means that it is not possible at present to quantify these. It should be noted that there may be both opportunities and challenges within the delivery of this plan. Links to the narrative under ‘Communications’.

 Commercial: There are impacts arising from this report. The unknown duration of the COVID-19 situation means that it is not possible at present to quantify these. It should be noted that there may be both opportunities and challenges within the delivery of this plan. Links to the narrative under ‘Communications’.

 Asset: There are impacts arising from this report. The unknown duration of the COVID- 19 situation means that it is not possible at present to quantify these. It should be noted that there may be both opportunities and challenges within the delivery of this plan. Links to the narrative under ‘Communications’.

Conclusions and Recommendations

The Board is asked to note the contents of this report, the revised Operational Business Plan 2020/21 in Annex 1, the impact on the 2020/20 Budget in Annexes 2 and 3.

Author: Lindsey McNeill Title: Director of Corporate Services Date: 16 April 2020

BM/07i/APR/2020 ASSET DECISION

EXECUTIVE DIRECTOR SPONSOR: RICHARD MILLAR

CAPITAL WORKS PROGRAMME 2020/21

Purpose

This paper has been reviewed by the EMT and sets out our proposed investment plan for the £12.2m Scottish Government capital grant allocation.

The board are requested to approve this investment strategy - this will allow the Executive to request final review and ratification from Scottish Government.

Priority

This matter is routine, however, requires Board and Scottish Government approval, due to many of the investment values exceeding the £250,000 threshold.

Background

Ongoing investment in our assets is critical to maintain a safe and operational canal network. In June 2018, we launched our Asset Management Strategy, which highlighted the backlog of works on the network and sets out the required investment to maintain the canals in an operational state.

Over the last 2 years, we have seen an increase in GIA capital funding, enabling progress to be made in reducing the backlog, however, challenges remain.

The 2020/21 capital funding of £12.2m has been considered in the context of the range of business needs with £8.425m (69%) allocated to canal infrastructure improvements, with the remainder allocated to other business objectives.

In addition, the revenue budget process has been developed and currently indicates an allocation of £1.376m allocated to Materials and Contracts, Plant and Professional Fees. However, due to the current uncertainty regarding the impacts of Covid-19 on the overall budget, it is recognised that this value is subject to review.

Capital Investments: Business Development

The business development list has been created to align with the corporate plan and identifies investments in transforming our canals (investing in communities, customer facilities & income generation), creating opportunities (investing in communities and partnerships), excelling (through improved governance, efficiency and process) and respond to global challenges (carbon reduction programme)

Full details are outlined in Appendix A, high level summary is shown below

Investment Spend Asset Management Plan £8.425m Business Development £3.775m

Key Issues

The full and detailed items of expenditure associated with canal asset investments are included in Appendix A, with the wider portfolio of capital investments included in Appendix B.

Board approval is required to commence full project development of these projects. We are concerned that the present Covid-19 shutdown may delay our programme and are aiming to commence construction preparation works as soon as restrictions are lifted. We are aware that the capacity of supply chains to deliver projects will be restricted in terms of accessing sites for investigations, we will keep the board updated should we require to amend the investment proposals through the financial year.

Each of the packages of work constituting a project, will be developed as a stand-alone project for the purposes of managing information, procurement and financial reporting, variances and significant risks will be reported to the operational & investment boards and subsequent quarterly board reports

Corporate Implications

 Strategic Priorities: the proposed approach is aligned with the Corporate Plan;

 Risk/Risk Appetite: staff resources remain tight and depending on the length and impact of covid-19 shutdown we may encounter challenges as the year develops. Plans are in place with the expectation that construction works can recommence in Q2.

 Legal: nothing to note;

 Financial: Covid-19 lockdown has resulted in a number of existing sites to be closed with additional costs, the situation may affect future construction costs. The impact of Covid-19 on SC income will affect the potential SC revenue budgets.

 Human Resources: Engineering/ PM resources remain tight and delivery implications will be monitored

 Fair Work First: nothing to note;

 Communication: nothing to note;

 Community & Third Sector: nothing to note;

 Commercial: nothing to note;

 Asset: progressing the proposals are key to progressing investments to meet the Asset Management Strategy

Conclusions and Recommendations It is recommended that the board approve the proposed capital investment in the Asset Management Plan/ Business Development programme to enable these projects to be rapidly progressed.

Author: Richard Millar Title: Director of Infrastructure Date: 15th April 2020

BM/08/APR/2020 CORPORATE NOTING EXECUTIVE DIRECTOR SPONSOR: DAVID BLAIR

GOVERNANCE REVIEW Purpose

The Board to note progress of the Governance review and provide additional comments on the proposed Governance structure as noted in Appendix 1.

Priority

Routine.

Background

The new Corporate Plan 2020-23 sets out the organisational aims and activities for the three year period ahead with a focus around stability, stewardship of public money and delivery. One of its key aims is to ensure that Scottish Canals excels in governance, financial resilience, and demonstrates a commitment to innovation.

Key Issues

The CEO raised the opportunity to develop Governance more fully previously and was supported by the ARC and Board to progress this. These areas identified cluster around intermediate processes and the superficial use of paperwork and the ability of formal structures to effectively surface and ‘grip’ decisions around key events in the lifecycle of projects and other critical events. The areas identified to review further are not universal but they appear regularly in such reports and the focus of this review therefore is about ensuring effective, proportionate and culturally competent governance.

Scope of Changes

 Framework Document and Annual Grant-in-Aid Award Letter (issued by Scottish Government) (separate paper)  Annual Grant-in-Aid Award letter (issued by Scottish Government) (separate paper)  Governing Board and Internal Board Structure (this paper)  Project Governance  Financial Governance  Scottish Canals’ Statement of Delegated Financial Authority (separate paper)

Primary Outputs

 A revised internal Board structure with clear and transparent processes and documentation that supports assurance and audit requirements  Re-modelled finance and project governance arrangements to adapt to new requirements under the Scottish Public Finance Manual (no longer operating as if a private company)

 A revised Corporate and Operational Governance Arrangements document, last updated May 2018. This will provide a single source of truth for all key governance documents and ensures clear alignment and transparency.

Proposed Changes Given the nature of the problem needing to be solved, this review is starting from the whole governance picture and working through each element (processes, paperwork, sequencing, behaviours and feedback loops). This paper outlines the initial re-casting of the Board structure under the Main Board. No changes to the Main Board or the two existing sub- committees is proposed initially until the new Executive Boards have been introduced for two or three substantive meetings. This gives time to work through early teething problems and set expectations of how people need to behave differently to achieve more effective governance.

The key concepts for each board are summarised below and incorporate feedback from the ARC meeting on 26th March 2020. Draft terms of reference have been drawn up along with a draft governance cadence to show the sequencing of boards at a glance.

Executive Management Team: All strategic issues, ultimate escalation before Main Board, HR/Workforce/People issues, global budget sign-off, novel and contentious issues. The ARC recommended that the Executive Management Team monitor and approve change projects put forward by the all-staff Change Forum rather than establish a separate Change Board. This has the benefit of streamlining the Governance structure and gives ‘change’ a sense of visibility and legitimacy within the business.

Enterprise Board: Customer policy, business development and new business opportunities (regeneration, destinations, income generation generally) and associated marketing. Replaces Tourism Exec and expands to include all Revenue & Regeneration activity. Owns ‘changes’ to the operating models of the organisation to draw a clear line with the Operations Board. Produces the draft ‘Commercial’ budget for consideration by Finance Planning Board.

Operations Board: Delivery of the annual business plan. A highly focused walk through of key milestones and performance indicators of all parts of the business to assure delivery of the business plan and to trigger corrective action. Frequent (weekly/fortnightly) and focused.

To advance the agenda around the importance of Health and Safety, and accounting for current academic thinking around how it is perceived, we are integrating H&S milestones and indicators into the Operations Board approach so teams begin to treat it as a core part of their delivery. The changes in senior structures (moving H&S assurance out of Infrastructure and Ops Directorate and into Policy and Governance) is a counterbalance to this so Health and Safety remains visible and accountable.

Health & Safety Committee: In compliance with legislation the current H&S Committee structure will be retained and report to the Operations Board to ensure consultation with employees, through TU Reps and Reps of Employee Safety. The existing membership of the Committee to be reviewed to engage more employee representation.

Investment Board: Portfolio go/stop/challenge board that owns the entire asset investment programme and (broader) capital budget. Approves or rejects new business cases and

confirms delegated authority to each project. Supported by the Project Assurance Committee which focuses on delivery of projects and escalates all but trivial changes in focus or finances to the Investment Board. Terms of Reference of the Board and Committee spell out the relationship in order to lock down the risk of mission creep, unplanned use of contingencies and ineffective use of reporting tools. Project documentation will further constrain the financial authority of any individual involved in the project beyond the general limits set out in the Delegated Financial Authority statement.

Finance Planning Board: To oversee the strategic finance planning, particularly, the global budget envelope and departmental allocations. Considers topical and finance policy changes. Meets infrequently but purposefully around Scottish Government key timescales (post-Budget, before April, ABR). The Board meets to consider and ratify the annual Grant-in-Aid award by Scottish Government, the proposed Capital budget by the Investment Board and the proposed Commercial budget by the Enterprise Board. A full budget is then generated and allocated to teams (including as appropriate through any budget negotiation process). EMT would be asked to rubber-stamp / challenge by exception the budget.

The ARC proposed that the Investment Board could be absorbed into the Finance Planning Board to further streamline the Governance structure and additional comments from the Board are invited. Our view is to retain this as separate at least during 2020/21 to give focused and dedicated attention to the significant redevelopment required around both financial and project governance.

The aim of the Financial Control Committee is to manage in-year delivery of the agreed budgets. Acts as the zero-sum control forum for changes in budgets to assure a balanced end-year budget (and cash balance). Teams wishing to grow their budget must work with finance in advance to find teams able to give up budget so the committee is capable of approving agreeable changes. This is intended to provide an auditable pathway for teams to seek changes that are timely and effective, do not require intensive EMT involvement and do not inherently change the risk profile of the organisation.

Timescales A series of focus groups with the chair and key members of each Board are planned in April to scope out each Board and facilitate management buy-in prior to implementation of the revised governance structure with effect from early May 2020.

Corporate Implications

 Strategic Priorities: The Governance review will drive SC's ability to actively manage and achieve its strategic priorities and Business Plan objectives. The aim to excel in governance is supported by the following key performance indicator:

“We will reform how we take decisions to improve the public value and sustainability of our resources.”

 To be successful in achieving this key performance indicator, Scottish Canals has undertaken to review and implement new Governance arrangements to provide assurances that the organisation is well governed and that the risk of governance failure is minimised. The Governance structure attached as an appendix reflects the

identified need to create the time and space for teams to develop credible and measurable plans to deliver the Corporate Plan and annual Business Plan aims.

 Risk/Risk Appetite: The implementation of the Governance restructure will ensure a focus on strategically critical activities and corporate behaviours that should reduce risk. The management of risk would be a golden thread throughout the governance structure and a specific focus of the Operations Board. The governance structure will ensure that internal audit actions are visible and tracked by the ARC to provide the Board assurance.

 Legal: Nothing to note.

 Financial: All resources spent by Scottish Canals will align to the Corporate Plan.

 Human Resources: The Governance restructure will dovetail with the People Strategy to capture a wide range of important commitments, including performance management improvements.

 Fair Work First: Nothing to note.

 Communication: Clear internal communications and opportunities to provide feedback are key to the successful implementation of a new Governance structure.

 Community & Third Sector: Nothing to note.

 Commercial: Nothing to note.

 Asset: Nothing to note.

Conclusions and Recommendations

The Board to note progress on the Governance review. Comments are invited on the role and value of a distinct Financial Planning Board.

Author: Nicola Christie Title: Head of Legal Services Date: 16.4.2020

Appendix 1

BM/8i/APR/2020 CORPORATE NOTING

EXECUTIVE DIRECTOR SPONSOR: DAVID BLAIR

SCOTTISH CANALS FRAMEWORK DOCUMENT AND GRANT IN AID 2020-21 FUNDING LETTER

The Board should note that this paper has been considered by the EMT

Purpose

The Board to note progress regarding:

1. Scottish Canals’ revised draft Framework Document with Scottish Government; and 2. Scottish Government’s Grant-In-Aid 2020-21 Funding Letter.

Priority

Routine.

Background

For accountability and transparency Scottish Canals’ Framework Document has been updated to reflect Scottish Canal’s change of status to Non Departmental Public Body (NDPB) with effect from 1 April 2020.

Following the Scottish Government Budget 2020-21 announcement, Scottish Canals Grant- in-Aid offer of funding letter 2020-21 was issued on 3rd April 2020 for acceptance.

Key Issues

Scottish Canals Framework Document

The latest draft of Scottish Canals’ Framework Document is attached as appendix 1 with tracked changes to be approved by Scottish Government for information.

The draft document has been reviewed by SG’s Public Bodies Unit, Property Division, SG Lawyers and Finance Business Partner and adheres closely to the Model Framework Document for Executive NDPBs.

The tracked changes reflect further amendments following a review of the Historic Environment Scotland Framework Documents as a NDPB with a similar business model. The Board to note that a delegated authority limit of £250k for new JVs and new projects within existing JVs has been proposed.

The Board to note that Scottish Canals’ has requested that a specific financial provision be retained from the current Framework Document as follows:

“The long term sustainability of Scottish Canals’ business model is based on a requirement to generate operating surpluses for reinvestment in SC assets, including assets likely to produce a trading income for the organisation. Under the terms of the Transport Act 1968, SC is required to act “as if it were a company engaged in a commercial enterprise” in certain cases. In effect this should act to prevent SC causing distortion in any commercial market within which it is operating.”

The inclusion of this specific financial provision reflects that Scottish Canals has a commercial portfolio, in line with the Ministerial Direction, which requires to be maintained to ensure strong financial sustainability.

Awaiting sponsor team approval of Scottish Canals’ proposed amendments. Thereafter the Framework Document will be submitted to the Cabinet Secretary for the comment ahead of publication.

Scottish Government’s Grant-In-Aid 2020-21 Funding Letter (GIA letter)

Scottish Canals has requested further clarification/amendment with regard to the following issues:

1. The GIA letter does not refer to the depreciation funds. Given this is the first year of Scottish Canals moving to SG budgeting, Scottish Canals has requested this to be referenced in the GIA letter for transparency and accountability and audit purposes.

2. Scottish Canals has also highlighted an omission to recognise that Scottish Canals’ long term sustainability is based on a requirement to generate operating surpluses for reinvestment in SC assets, including assets likely to produce a trading income for the organisation. This amendment reflects the specific financial provision to be added to the Framework Document.

The Board to note that discussions are ongoing with the sponsor team.

Corporate Implications

 Strategic Priorities: The Framework Document and Grant-In-Aid Funding Letter underpin Scottish Canals’ internal Governance structure to drive SC's ability to actively manage and achieve its strategic priorities and Business Plan objectives.

 Risk/Risk Appetite: The Framework Document underpins Scottish Canals’ focus on strategically critical activities and corporate behaviours that should reduce risk.

 Legal: The Framework Document and Grant-In-Aid Letter to reflect Scottish Canals’ statutory duties.

 Financial: The Grant-In-Aid Letter 2020-21 is critical to the business.

 Human Resources: Nothing to note.

 Fair Work First: Nothing to note.

 Communication: The Framework Document will be published on Scottish Canals’ website for accountability and transparency.

 Community & Third Sector: Nothing to note.

 Commercial: Nothing to note.

 Asset: Nothing to note.

Conclusions and Recommendations

The Board to note:

1. Scottish Canals’ revised Framework Document with Scottish Government in its current draft format attached as appendix 1;

2. Scottish Government’s Grant-In-Aid 2020-21 Funding Letter in its current format, with Scottish Canals’ comments, attached as appendix 2.

Author: Nicola Christie Title: Head of Legal Services Date: 16 April 2020

BM/8ii/APR/2020 ) CORPORATE MONITORING EXECUTIVE DIRECTOR SPONSOR: DAVID BLAIR

DELEGATED AUTHORITY UPDATE

Purpose

This paper provides an update on part of the Governance Review to update the Statement of Delegated Financial Authorities (DFA).

See attachment: Appendix 1 [Delegated Financial Authority – Master List.pdf] Priority

Routine.

Background

The current DFA is substantially out of date following the changeover of a large number of staff with delegated financial authority. Financial management across the business has been maintained despite this.

Key Issues

There are wider issues around finance and project governance that are subject to separate policy development in an effort to improve the separation of roles, clarify lines of accountability and authority and simplify decision-making. This update feeds that process by taking the delegated authority set out in the overall Framework Document and aligning the authority limits to appropriate individuals. This sub-delegation occurs as part of the routine sub- delegation expected of the Accountable Officer and its effective and appropriate operation is accounted for annually in the normal way. The Board are reminded that the Framework Document is not yet finalised after some specific points (including some delegated financial limits) were queried. As a result, this document is subject to minor alteration in the near future.

Key changes include:

 Removal of former members of staff  Addition of new members of staff  Specific changes in authorities highlighted in blue  Restructuring of the document to split members by Directorate to improve visual lines of authority and role separation  Footnotes to clarify that Director-level authority is constrained by the need for quorum- based agreement of Directors  Footnote to explain that these are maximum limits that defer to any further constraints imposed by Project documentation (agreed and varied by the Investment Board)  Separation of Purchase Order column to make Purchase Order Credit Notes / Invoice Credit Notes a separate authority to limit risk of inappropriate use of supplier credits  Clarify heading of ‘lease authority’ to include operational and finance leases to reflect intentions of IFRS16 (treating all leases most consistently)  Alignment with Framework Document

Corporate Implications

 Strategic Priorities: The DFA underpins clear financial accountability in concert with the wider Governance changes underway across the organisation. This supports corporate plan objectives around excellence in financial governance, stewardship of public resources and transparency.

 Risk: An updated DFA reduces the risk of financial malfeasance as well as sanctioned off-book decision-making.

 Legal: Nothing to note at this time.

 Financial: The DFA is a critical financial control document. Workflow and SAGE systems reflect this document.

 Human Resources: Nothing to note at this time.

 Fair Work First: Nothing to note at this time.

 Communication: Appropriate communications will be needed (including through effective operation of the new Board structure) to promote awareness of limits and authorities and to promote improved financial governance.

 Community & Third Sector: Nothing to note at this time.

 Commercial: Nothing to note at this time.

 Asset: Nothing to note at this time.

Conclusions The Board is asked to note the contents of this report.

Author: Nicola Christie Title: Head of Legal and Governance Date: 16 April 2020

BM/09/APR/2020 ) CORPORATE MONITORING EXECUTIVE DIRECTOR SPONSOR: Catherine Topley

QUARTER 4 2020 BUSINESS REPORT

The Board should note that this paper has been considered by the EMT on 07 April 2020.

Purpose

This briefing paper provides the Board with a progress update on the delivery of the objectives set out in the 2019/2020 business for the period Quarter 4 (Jan-Mar).

A report reviewing overall performance during 2019/20 will be produced for a future Board during 2020/21.

Priority

Routine.

Background

The board plays a critical function in monitoring the performance of the organisation, including its operational, strategic and financial objectives. A key aspect of the board’s oversight role is to actively monitor management’s execution of approved plans, as well as the organisation’s progress toward meeting its objectives.

Following the approval of the business plan for 2019/20 it was agreed that the board would receive a consistent method of reporting aligned to the agreed objectives within the plan. This written report provides a summary of performance against the business plan. Appendix 1 provides a detailed update to each of deliverables as outlined in the business plan.

This report provides a quarterly update for Q4, and is not intended to be the final report on performance against the 2019/20 business plan.

This report is supplemented by more detailed reports covering key areas of the business. These include Finance, Health and Safety, Asset Management, Estates, Commercial and Operations and also Communications.

Key Issues

1. Following on from my previous quarterly report to the board on 30 January 2020, the following are notable issues in the reporting quarter.

COVID-19: During Q4, COVID-19 became a dominant issue which Scottish Canals had been aware of and was monitoring. As CEO I had engaged early with Transport Scotland, our sponsors, to advise of potential early financial implications if Scottish Canals trading was impeded by the virus.

On 20th March the Board were advised via a formal paper, through an email circulation that Scottish Canals was adhering to Government guidelines and would be progressing a prompt shutdown of all non-essential operations. Through correspondence the Board and Transport Scotland requested some additional information, however unanimously agreed to the position taken by the EMT.

Prior to that decision the EMT had enacted a typical business continuity structure; Gold (initial group then strategic focus), Silver (operational leadership) and Bronze (delivery), in which communications, discussions and decisions were recorded and then cascaded to the organisation, stakeholders and customers. Following the paper on the 20th March the following notable issues have occurred:

 Formalised business continuity comms and cascade process;  ARC met 26 March 2020 and reviewed and discussed Business Continuity with particular reference to this current crisis;  Internal audit requested that any amendments to delegated authorities were tracked and noted. For example use of electronic signatures instead of a wet signature.  Scottish Canals have exchanged detailed analysis of business performance and delivery with Transport Scotland and detailed the worst; possible; best case financial impact of COVID-19 on our operations’; See Agenda item 7 papers  Scottish Canals have supported Transport Scotland by providing a cash flow projection for April and May to support Government in planning for and managing the budgetary implications of COVID-19;  Scottish Canals have offered both Scottish Government and Transport Scotland support of our assets and resources. Neither have been accepted.

A further paper is included in this session specifically relating to Business Continuity.

Business delivery: Appendix 1 contains the relevant KPIs and commentary of performance for the 2019/20 business plan Q4. In summary, the final quarter saw the following performance by delivery status.

 7 objectives Red  15 objectives Amber  42 objectives Green

Delivery KPIs

 19 Red  8 Amber  29 Green

The key cross-cutting reasons that have frustrated delivery (reds and ambers) has been COVID whose impact lasted for more than 1/3 of the quarter combined with budget uncertainty and wider strategic issues around the organisation’s move to a new accounts direction. Changes in senior leadership during this quarter supported delivery and some reprioritisation of effort to focus on tactical interventions related to the wider issues mentioned above. This has been at the cost of some lower level deliverables.

Governance: During the last month of Q4 Scottish Canals engaged with Transport Scotland to ensure the receipt of our updated Framework Document and annual Grant-in-Aid Funding letter. These reflect the change to in our accounts direction and budget. Scottish Canals has

requested a discussion with Transport Scotland regarding the wording associated with our ability to act commercially and fund such projects. Scottish Canals responded to our budget letter and Framework agreement on the 3rd and 6th April respectively.

Finances: The end of year finance report details the financial position of Scottish Canals from a company accounts, public finance and cashflow perspective. The change in accounts direction from company accounting to Scottish Public Finance Manual accounts and budgeting combined with the effects of COVID19 has contributed to a very strong focus on end year spend and financial discipline. The final position was an accounting surplus of £6k after all transactions had been accounted for. Excess cash was appropriately spent on approved capital or revenue projects or otherwise accrued within the new accounting rules or returned temporarily to a funder reflecting the need to reverse receipt in advance of need.

Profiling of the first two months of the new year has been shared with Scottish Government but as an organisation hit disproportionately by COVID19 (loss of material levels of trading revenue) we are modelling a number of scenarios before confirming the full year cashflow projections.

Succession Planning: No major work has been undertaken on succession planning in part due to the ongoing impact of COVID19 which has required an intense focus on stabilisation in the near term. One of the effects of this has been to halt recruitment of the Revenue and Regeneration Director role with responsibilities continuing to vest with the Director of Policy and Governance. This work will be reviewed in tandem with COVID19 exit planning.

Corporate Plan 2020-23 & 2020 Business Plan: The corporate plan is now complete and sits with Transport Scotland for formal approval and sign off. Once this has been received a communication plan is in place to promote this.

The 2020 business plan had made significant progress, however owing to COVID-19, this has been significantly streamlined to act as a base line for a measure against what the organisation aimed to deliver and what it achieved. As such a Interim business plan has been progressed that looks at a 6 week; 3 month; 6 month and 12 month delivery model. This allows the business plan to be amended quickly to adapt to the changing business and commercial circumstances of COVID-19.

Corporate Implications

 Strategic Priorities: The delivery of the 2019 business plan has been strong. Although a number of lower level milestones was not achieved in the quarter, the decisions to change, delay and in some cases stop (e.g. seasonal recruitment) were strategically driven in light of the very significant challenges facing the organisation. A full review of delivery for the year will be presented to a future board.

 Risk: COVID-19 was added to the risk register during the quarter, including the consequences surrounding this; e.g. financial implications; delays to delivery of key projects and a financial risk surrounding the reliance on tourism and commercial income in the overall operating costs.

 Legal: There are no issues within this report that have not already been detailed within this or other reports tabled.

 Financial: There is a separate finance paper that details the financial performance in the last quarter. The financial challenges that Scottish Canals face remain extremely challenging.

 Human Resources: The delay in announcing the budget led to considerable unease in the staffing groups as they have become accustomed to recruiting earlier to prepare for the season. This was managed internally, and subsequently was not an issue owing to COVID-19. The decision not hire seasonal workers has had an impact in terms of HR and ICT priorities. The impact of employing no seasonal staff is not yet clear if customer operations and trading activities resume quickly in 2020.

 Fair Work First: There are no new or identifiable matters from this paper.

 Communication: The notable communication elements are detailed within this paper.

 Community & Third Sector: There are no notable impacts in this report.

 Commercial: There is a separate commercial report that details progress against delivery of the business plan. This report highlights many successes as well as the challenges of generating and estimating accurate income balanced with expenditure required to run the destinations.

 Asset: There is a separate asset management report that details the progress being made against the asset plan and the challenges to manage Scottish Canals’ assets with limited budget available.

Conclusions and Recommendations

The Board is asked to note the contents of this report.

Author: Catherine Topley Title: Chief Executive Officer Date: 6 April 2020

BM/10i/APR/2020 CORPORATE MONITORING

EXECUTIVE DIRECTOR SPONSOR: Lindsey McNeill

Q4 FINANCE AND PERFORMANCE REVIEW REPORT

The Board should note that the contents of this paper have been considered by the EMT.

Purpose

This paper provides the Board with an overview of the financial position at the end of the March 2020, representing the end of Quarter 4 in the financial year 2019/2020. It also updates Board Members on a number of finance-related topics which the team are currently focussed on.

Priority

Routine. The information contained in this paper is not urgent and forms part of the regular reporting suite of information to the Board.

Background

The Board receives regular reports on the management accounts, and the information contained in Annex A states the position achieved at the end of Quarter 4.

In addition, the Board are regularly updated with the overall performance of the finance function in order to offer additional oversight and guidance regarding the use of public funds.

Key Issues

1. Year End Position: The overall end year position indicates that that there is currently a small surplus of ~ £6k. Year-end work is still on going to finalise the position on all contracts and there may still be final adjustments required as a result of this. Thereafter the accounts will be subject to external audit during May 2020. The Covid-19 pandemic may have an impact on timescales for finalising the year end position, but all parties are working to planned timescales for laying of accounts before Scottish Parliament in August 2020. The year-end position was also contributed to through the COVID-19 arrangements to support suppliers through the closedown period. (See further explanation under ‘COVID-19 Arrangements’ further on this paper.)

2. Agreement with SG regarding Year-End Position: The Scottish Government recognise that Scottish Canals can formally recognise within the accounts the supplier retention balances due of £670k. These monies relate to specific completed project retentions to be paid out to subcontractors. All money within the bank account had been allocated and spent prior to year-end, with the exception of £1.4 million, which was transferred back to Glasgow City Council for NGIWMS project. This money was returned because Scottish Canals had drawn funding in advance of need, a position not permitted under the new SG accounting framework that we now operate under. This money will be paid to Scottish

Canals when required work is incurred to pay for the ongoing maintenance and licenses associated with the Smart Canals project.

At this time the provisional year end outturn position indicates that for the previous financial year Scottish Canals do not require additional funds from Scottish Government to cover any deficit. Furthermore there is no surplus cash outstanding to pass to Scottish Government, or that would score against future budget allocation.

3. End of Year Accounts Preparations: Activity is already underway in preparation for our external audit, including a draft of a hybrid-style Annual Report & Accounts. This format will offer readers of the accounts the ability to see our transition from a public corporation reporting under Companies House, into reporting as a NDPB under Scottish Public Finance Manual (SPFM), Consolidated Budgeting Guidance (CBG), and the Government Financial Reporting Manual (FReM). This will also allow for smoother statement of the accounts at the end of this current year in terms of being easier to show shadow accounts.

The accounts will include an analysis of the IFRS-16 Impact of Leases. The Governance Statement will be supported by the extra detail required within the internal assurance statements signed by the Directors.

4. VAT & HMRC issue: Discussions with HMRC are continuing, through our external advisors KPMG. It has been confirmed in correspondence from HMRC dated 20 March 2020, that there is an extension of the appeal time-limit on the understanding that there a number of points that both HMRC and Scottish Canals are seeking to clarify. There was also confirmation in the same correspondence that interest will still accrue during this period, however these will be adjusted should the assessment be reduced. Further communication has indicated that due to the COVID-19 situation, other priorities may now take precedence, and therefore any expected timescales have been relaxed. A provision for the circa £7m liability will however require to be recognised within the year end accounts.

5. Covid-19 Pandemic: Following the implementation of Covid-19 restrictions, both Treasury and Scottish Government issued guidance in relation to supporting employees, suppliers, and tenants through this period. In relation to procurement activities, specific guidance was issued in relation to offering options for Supplier relief during this period. The Procurement, Finance and Executive teams assessed those suppliers currently under contract, to see what options were viable and have paid invoices in line with Government guidance set out.

6. Compliance with Accounting Frameworks: As of 1 April 2020, Scottish Canals is now designated as a Non Departmental Public Body, reporting financial information in line with the Scottish Public Finance Manual (SPFM), Consolidated Budgeting Guidance (CBG), and the Government Financial Reporting Manual (FReM). We are now in receipt of our formal Grant-In-Aid letter, although clarification is sought over specific wording regarding commercial activities.

Going forwards, this may mean that commercial & regeneration activities have to be self- sustaining and viable, with any surplus being re-invested in those commercial ventures.

7. NDPB Insurance Arrangements: Implications arising from being a NDPB have meant that decisions have been made in relation to the level of commercial insurance cover now purchased by Scottish Canals. Based on value for money and in line with other comparable

public bodies, the Executive Management team has decided that Scottish Canals’ should continue to maintain a risk protection programme balanced between self-insurance of the canal infrastructure and commercially insured risks. For information Scottish Canals has approved the following insurance renewals for the 2020/21 financial year:

 Commercial Combined – includes all the Buildings, Contents and items of Plant & Money  Public/Products Liability  Directors & Officers Liability  Professional Indemnity  Motor Fleet  Ship Hull  Engineering Inspection

In accordance with the SPFM guidance, Scottish Canals as an NDPB, has requested that Scottish Ministers issue a certificate to Scottish Canals for Employers' Liability

8. Budget planning for 2020/2021: Extensive planning and consultation was undertaken for the original budget for 2020/2021, however the impact of Covid-19 has now seriously changed the parameters of the budget due to the lockdown period. Various scenarios have been modelled, but the worst case scenario is that we have to pay internal and external contractual liabilities, and receive no income at all for the duration of this financial year. This is covered in more detail in Agenda Item 7 on this meeting agenda.

9. Update on skills & competencies in relation to operating as a NDPB: Following on from previous board updates, the Finance Team has been strengthened by the addition of a short term temporary contractor with public sector experience. This is also being supplemented by an external senior finance professional who is offering mentorship to the whole team in relation to producing NDPB accounts. Collectively this will lead to more detailed budget forecasting and financial management across the whole organisation. This is being underpinned with a mandatory budget management training module for all budget holders, revised delegated authorities and compulsory monthly valuation statements for all current projects.

However, the exit of the previous Finance Director and a review of the skills in the current team have confirmed the concerns discussed in previous Boards. As such consideration is being given to establishing a piece of consultancy work which looks at the urgent ERP requirements across Finance, as well as re-engineering processes in order to maximise efficient working practices. The rationale for this is to allow the team to continue their operational functions until an improved system is identified and put in place. This work has yet to be fully scoped and costed.

10. Internal Audit of Financial Governance: Internal Audit recently issued a draft report on their findings on the financial governance arrangement, which has concluded with reasonable assurance and recognises the same areas of improvement as the internal training plan, and has also recognised where there are still areas of ongoing requirement/update. This is also covered in more detail in the Financial Reporting Action Plan paper (Paper 10ii) on this meeting’s agenda.

Corporate Implications

 Strategic Priorities: This financial report demonstrates performance against the previous agreed budget for 2019/20, and indicates direction of forward travel in the current Covid- 19 situation.

 Risk: There are no direct risks associated with this report, however the overall impact on Covid-19 is being assessed on a regular basis. In terms of financial reporting there is no risk.

 Human Resources: There is a large proportion of the workforce not being able to work to full capacity due to restriction, but who remain on full pay in accordance with the direction given by Scottish Government.

 Fair Work First: No employee is suffering financial detriment as a result of the COVID-19 period. Trade Unions are actively engaged in regular conversations about the organisation.

 Communication: This report forms part of the regular suite of reporting to the Board, with no additional implications.

 Community & Third Sector: There are no immediate impact of this report, however the unknown duration of the COVID-19 situation means that it is not possible to quantify these for future projections.

 Commercial: As per Community & Third Sector narrative.

 Asset: As per Community & Third Sector narrative.

Conclusions and Recommendations The Board is asked to note the contents of this report and the Q4 Management Accounts in Annex 1.

Author: Lindsey McNeill Title: Director of Corporate Services Date: 16 April 2020

BM/11/APR/2020 CORPORATE MONITORING

EXECUTIVE DIRECTOR SPONSOR: David Blair

Q4 HEALTH & SAFETY REPORT

Purpose

The purpose of this paper is to report the Q4 Health & Safety performance of the organisation to the board.

Priority

This paper is of routine priority as it is a quarterly requirement of SC’s Health & Safety performance monitoring.

Background

We continue to engage with CRT/Waterways Ireland and the Broads Authority and we have agreed in principle to share data for inclusion in our end of year Q4 report. CRT have shared their RIDDOR data to November 2019 as can be seen below

Year RIDDOR SC 2019 - 20 1 CRT 2019 - 20 4* * Year to date

Key Issues

Incidents/Accidents Quarter 4 performance has been positive with significant improvement on previous years, although there was one RIDDOR reportable incident in January.

Year RIDDOR LTI 2019 - 20 1 1 2018 - 19 5 3*** 2017 - 18 4** 4 **Includes 1 Reported by Commercial Operator Scottish Segway ***Includes 1 Reported by idverde

RIDDOR incident

On the 9 January 2020, the Carron Rib was recovered from Grangemouth (Lock 2) to carry out maintenance on the outboard motor. It was transported to the West Mains workshop via trailer. The trailer tipped up sharply as it was being unhitched due to inadequate nose weight on the front of the trailer, trapping the tip of the employee’s thumb between the tow bar coupling and the underside of the towing vehicle. The employee received first aid on site prior to being taken to hospital where his thumb was surgically amputated down to the first knuckle. He was signed off work for four weeks and has since returned to full duties. The incident was reported to the HSE as a specified injury. The incident has been fully investigated and the lessons learned briefing is attached in Appendix 4.

Notable Incidents

In February, three colleagues sustained first aid injuries to their hands whilst working with/accessing hand tools. Staff have been reminded to review their work tasks, use suitable gloves where appropriate, and store tools carefully when not in use.

On 1 March, a crewmember fell overboard during a man overboard recovery exercise at the Falkirk Wheel. The crewmember was leaning out to recover a life belt (simulating a casualty) when he subsequently fell into the water. The crewmember was wearing a lifejacket that inflated and was able to self-rescue by swimming to shore. The incident has been reviewed by the boat team and lessons learned adopted into future exercises and procedures.

Wellbeing The overall absence rate for the quarter was 4.69%, an increase of 1.12% on the previous quarter. Eight employees were referred to occupational health for support in this quarter of which five (62.5%) were related to mental health issues.

Looking ahead:

 Mental Health Awareness – work is progressing to ensure that all Line Managers receive NHS-funded training. We have scheduled this for 4th November 2020 (approx. 45 managers).  Practical help and guidance has been provided via a mental health and wellbeing group set up within Yammer.

Communications

COVID 19 restrictions meant that the Year 1 Leadership & Worker Participation Workshop scheduled for mid-March has had to be deferred to later in the year; we are currently looking at the feasibility of presenting the workshop remotely. In the interim, with all but essential staff working from home, we are making good use of ICT systems to maintain and build effective communications with colleagues.

Head of Health & Safety

Jeanette Roberts was appointed as the Head of Health & Safety on 23 March. She brings with her a wide range of experience from the leisure, environmental and enforcement industry. A summary of her initial desktop review will be shared with the EMT at the end of April.

Third Party Support

In January 2020, we engaged Project HSS (PHSS) to carry out a review of health and safety per across our estate. The purpose of the review was to observe existing work practices, identify areas of non-compliance, and review existing policies with a view to developing an action plan to address key areas for improvement. A total of 33 inspections of visitor attractions, SC operational sites, office areas and contractor construction sites were completed in February and March. The initial findings of the inspections were due to be shared with the business in March during the Year 1 Leadership & Worker Participation Workshop but this has had to be postponed until later in the year due to the covid-19 pandemic.

Performance against the Strategic Action Plan (Appendix 1)

We continue to make progress against our action plan, however with the long-term absence of our Head of Health and Safety, unfortunately some slippage has occurred. Four areas of note are highlighted below:

 Risk management: Due to reduced capacity within the Safety Team, the development of enhanced POWRA material and adoption into eSkillz has now been prioritised for full roll-out to ALL staff by the end of April.  Strategic Business Continuity Plan – Development of a SMART template continues and will be improved with lessons learned during COVID pandemic.  Engagement of Directors / Heads of Service with monitoring program – Leadership Safety Tours.  Regional Leadership & Worker Participation Workshops, scheduled for March 2020, postponed due to COVID. We will work with Communications team to produce short media clips that we will circulate to all staff.

The Safety Team will be prioritising adding manual PowerPoint training courses onto eSkillz during Q1 of 2020.

Safety Monitoring (Appendix 2 & 3)

With support from our partner, PHSS, and contributions from the Heads of Group, our site audit programme remains balanced both geographically and across functional areas. The team have delivered 90 activities against a quarterly target of 75 (120%); as highlighted in Appendix 2. We continue to encourage further senior management participation.

Local Health and Safety Committees continue to be focussed on the delivery of their Local Health Safety Wellbeing Action Plans (LHSWAP); as highlighted in Appendix 3. Only one LHSWAP has a significant variance. This is in Estates, which under the Key Performance Indicator (KPI) scale, is at Amber. This has been investigated and relates to an overall under performance against targets across site visits, behavioural safety, training and near miss reporting. The Safety Team will work with respective Heads of Service to review targets and support improvements during 2021.

Overall performance in relation to the Minimum Safety Learning Standards is down in five areas; as highlighted in Appendix 2. This has been investigate and key areas of concern are:

 Update and maintenance of plans specifically casual staff (Estates and TFW)  Manual delivery items – Emergency Arrangements, POWRA, Water Safety, Confined Spaces Awareness and SC Vibration procedures  Additional wider eSkillz – Noise, PPE, Sharps, Vibration and Work at Height

Corporate Implications

 Strategic Priorities: Progress continues but was restricted by resource due to absence of Head of Health & Safety until the end of March.

 Risk: The Safety Team are planning to undertake an audit program to assess level of compliance across the canals.

 Legal: PHSS are undertaking a review of the revised year one quota of documents (25%).

 Financial: Consideration of realistic financial resource to implement software option for practical risk management and analysis in Q1 2020.

 Human Resources: A new Head of Health & Safety, Jeanette Roberts, joined the business on 23 March.

 Fair Work First: No issues to report.

 Communication: Collective work with other SC teams to support staff mental health and wellbeing while working remotely during COVID 19 restrictions.

 Community & Third Sector: We continue to work collaborative with industry partners in support of best practice during the COVID 19 Pandemic

 Commercial: No issues to report.

 Asset: No issues to report.

Conclusions and Recommendations

This report illustrates that good performance has been maintained during Q4. The Board is asked to note the progress. Author: Jason Burns Sweeney Title: Health and Safety Advisor Date: 15 April 2020

BM/12/APR/2020 ASSET MONITORING

EXECUTIVE DIRECTOR SPONSOR: RICHARD MILLAR

Q4 ASSET MANAGEMENT REPORT Purpose

This paper has been prepared to provide the Board with a summary of activities carried out during Q4 of the 2019/20 financial year.

Priority

This paper is routine reporting carried out on a quarterly basis.

Background

Funding from Scottish Government has been confirmed for 2020/21 with an increased capital funding allocation of £12.2m, nearly 70% of this funding has been allocated towards asset investments and the team are presently developing the works programme for next year. Scottish Canals continue to ‘operate at risk’, and at this level of investment our planned programme will reduce the present £76m of backlog to £70m by the end of 20/21.

A significant works programme has been undertaken throughout 2019/20 resulting in £6.4m capital and £1.23m revenue invested (Appendix D). The projects delivered are fully aligned with the philosophy set out in the Asset Management Strategy and have upgraded and repaired assets in priority order resolving the most significant risks.

A full list of works is detailed in Appendix A, a particular highlight being the completion of the gate replacements at Fort Augustus along with the delivery of the 3rd phase of embankment improvements at Linlithgow. During the works at Linlithgow heavy rainfall was encountered and a noticeable increase in leakage occurred. During the works an embankment slip was encountered, which was rapidly repaired, but highlights how critical these works are. As previously reported to the board, some adjustments (Appendix C) were made to the original works programme as a result of project funding challenges and available resources. The two most significant changes relate to the delay in delivering improvements to the Gairlochy Swing Bridge and Cairnbaan Swing Bridge (now expected to be delivered in 2 phases)

Asset health is constantly monitored; the present score is 2.67 (overall grade C) exceeding the target of 2.80. We continue to focus on High Risk Assets and improvement of overall asset health. The full inspection programme (including enhanced mitigation inspections) has been successfully delivered. A number of minor asset failures occurred in Q4 as detailed in Appendix B, both had a minimal effect on canal availability, Crinan Sealock Sluice is now fixed, however Bowling is still awaiting a part.

The Asset Team are finalising draft changes to the Asset Inspection Procedures to utilise available resource more efficiently, by reducing the frequency of regular length inspections and increasing our capacity for targeted and more detailed inspections where necessary. These proposals are expected to be completed for review by end April 2020, for approval by the Executive Management Team and Audit and Risk Committee at the next quarterly review.

There are still limitations on the extent of inspections beyond statutory requirements in some areas, with limited resource to be able to complete exhaustive and expensive underwater surveys, i.e. lock gates, sluices, mooring chains, navigational markers etc. or to carry out significant dewatering activities which incur additional costs associated with fish rescues and maintaining safe accesses. This will continue to carry risk with unknown asset condition and potential unexpected asset failures

We continue to review our reservoirs and emergency preparedness in response to the significant CRT Toddbrook/Whaley Bridge incident. We have undertaken local investigations into a number of similarly constructed spillways on Hillend and Townhead Reservoirs (Forth & Clyde) and completed remedial grouting works at Daill Loch West Dam (Crinan) where a Ground Penetrating Radar Survey (GPRS) indicated lower density sub base materials. We engaged with CRT and recently received and reviewed the independent report on the incident. We will consider each of the 22 recommendations arising from that report to provide an update at the next quarterly meeting. We are also arranging for our Reservoir Engineers to go on a learning visit to learn with the CRT team.

In line with recommendations from the ARC, AECOM completed a full third party GAP Analysis, compared with international best practice, and concluded that the maturity level of SC Asset Management, scored at 2.73, is positive - with a score of 3 out of 4, being “Mature”. However, significant additional resource is needed to reach a higher level. Notwithstanding the above, there are opportunities to improve, including widening the scope of asset management across all assets, finalising a policy statement and continuing to review resources and tasks, with an action plan based on the GAP analysis to be implemented through the 2020/21 financial year.

Arising challenges and opportunities associated with Climate Change and the Climate Emergency are evident. The Climate Change impact assessment completed in 2017 considered evidence from UKCP09. The recently published UKCP18 and corresponding SEPA Planning Guidance indicate that changes are more significant, with substantially increased sea level rise expected, which will affect 7 coastal interfaces, and more extremes in terms of wet and dry weather patterns. A further review of climate change risk, and the latest data, will be required to be complete in the short term, however this is not currently resourced;

Changes in strategic direction are being considered and accommodated where possible, with additional work streams now associated with developing User Operation. This requires additional resource to achieve delivery, whilst opportunities and development are continuing to be considered;

Key Issues

1) Both financial and staff resources remain insufficient to deliver the Asset Management Strategy in full. Risks are being mitigated in line with procedures and, as highlighted in the Asset Management Strategy, failures will continue to occur and require to be managed. The risk of canal closure to operations remains significant, however, we continue to progress activities in line with the Asset Management Strategy.

2) Budgeting for 2020/21 has been progressed, with revenue budget restrictions continuing to only allow investment on critical items, with revenue funding for underwater inspections, repairs or localised dredging extremely limited. We continue to discuss the value created by asset improvements and the ability to recognise these as a capital improvement and fund accordingly, i.e. significant dredging programmes;

3) We are currently reviewing the ongoing and developing situation with respect to Covid-19 and the implications for both internal and supplier resources. Suppliers have already issued early warnings associated with the developing situation. However, we are also considering the potential impacts on operations and opportunities that may arise associated with undertaking asset improvements during summer months as a unique opportunity;

4) The resources available to undertake abnormal load assessments of road bridges are limited, but a programme has been defined to resolve over the next three years. In the meantime, we continue to use engineering judgement on a case by case basis whilst improving the approach in this area;

5) The ability to dredge the canal to maintain navigation remains challenging as a result of severely limited revenue funding. The reduced navigation window on all canals is limiting access to larger craft and presents a reputational risk;

6) Due to lack of resource, we have delayed the development of the new contractor framework, however, procurement is now underway, with the PQQ documents issued in February and to be returned mid-April. This will require resources to be allocated to meet our committed time scales. Careful management of the changeover to the new framework will be need to mitigate risks to the delivery of the winter programme in 2020/21;

7) Project delivery continues to be impacted both by available resource and longer term programme development, which in turn impacts on procurement, project development and delivering value;

8) As a result of the unseasonal weather over the summer period, we continue to receive complaints from a number of residents at five locations across the Lowlands in relation to issues with groundwater within their gardens/ basements which they believe is emanating from the canal. These cases are often highly complex and we continue to investigate with the Local Authorities and stakeholders, whilst supporting residents. Such activities are resource intensive and other groundwater/surface water issues are usually present.

9) Asset degradation continues to occur, although there are no failures to report in the period associated with our assets. There have been challenges presented with 3rd party assets, i.e. Banavie Rail Bridge and Fort Augustus Swing Bridge.

Corporate Implications

Strategic Priorities: The Asset Management Strategy defines a level of investment required to move the canal infrastructure to a sustainable condition. Funding remains limited and therefore we continue to see asset decline. SC Asset team have strong processes to mitigate these risks but as expected there are structures which cannot be inspected and when issues like Gairlochy gates arise we need to revise our plans to deliver a safe canal.

Risk: Unknown asset condition remains a significant risk, Kytra embankment and Gairlochy gates illustrate this issue. The challenges of climate change on our heritage infrastructure requires further focus and resource;

Legal: Potential legal action may arise from the issues related to groundwater/ leakage and maintaining navigable waterways;

Financial: Cost estimation/ optimism bias remains a challenge within the Asset Management Strategy. We continue to proactively learn from all contracts to update the estimation in the AMS. In addition, the ability to deliver value through supply chain engagement with annual budgeting cycles is limited;

Human Resources: Some challenges exist around recruitment and retention of staff, particularly in the Mechanical and Electrical sector, across Scotland with resource demands from other sectors creating a highly competitive market;

Fair Work First: Nothing to report.

Communication: Delivery of a lessons learned bulletin/training to be facilitated locally for staff directly involved in incident, and a roll out of debrief for other members of the business to ensure adequate mitigation is in place, post-incident;

Community & Third Sector: Nothing to report;

Commercial: Nothing to report;

Asset: Nothing further to report;

Conclusions and Recommendations

The contents of this paper are for noting by the Board as part of routine reporting on progress and issues associated with Asset Management.

There are a number of overall asset improvements taking place through the focused delivery of available resource, whilst there continue to be challenges due to managing decline which affects our ability to maintain operational assets.

Author: Richard Millar Title: Director of Infrastructure Date: 14 April 2020

Appendix A Progress Report

• Significant delivery of works during 2019/20, predominantly focused during October – March has included:

• Major Safety Completed • Brighton's Burn Aqueduct culvert upgrade and strengthening works completed in Q1; • Reservoir Repairs 2019/20 Programme ; • Survey and Design for gate renewals at Gairlochy; • High Risk Embankment Investigations: • Muirtown, Caledonian; • Rowantree, Forth and Clyde; • Bonnybridge, Forth and Clyde; • Camelon, Forth and Clyde; Suspended due to Covid 19: • Wilcoxholm Embankment Strengthening, Linlithgow, navigation to be reopened and towpath to be fully reinstated on restrictions being lifted. Towpath currently accessible to public;

• Staff/Visitor Safety Completed • Crinan Reservoir monitoring system deployment, completed Q2 • Ardrishaig Pier Holding Pontoon Installation Q3; • Bellanoch Bridge West mooring installation, currently on site and completion completed in Q4; • Glen High Bridge abutment repairs Q3; Suspended due to Covid 19: • Corpach Jetty Upgrade, to be completed when restrictions are lifted – does not impact navigation;

• Operational: Completed • Completion of Leamington Lift Bridge refurbishment, funded by SUSTRANS, completed in Q2; • The Falkirk Wheel Winter Works programme, completed in Q4; • Crinan Lock Gate Surveys and gate designs to prepare shovel ready projects or works for 2020/21, completed in Q4 with canal drain down to facilitate survey; Suspended due to Covid 19: • Fort Augustus lock gate renewals, substantially completed, however commissioning to be finalised prior to navigation reopening;

Projects placed on hold, with a view to progressing in 2020/21 as a result of the additional revenue funding required to be allocated to the completion of Leamington Lift Bridge and reduction in revenue available as a result of Reforecasting: • Glen Village Weir – seeking 3rd party funding for 2020/21 delivery; • Muiravonside Weir – seeking 3rd party funding for 2020/21 delivery; • Stanley Road Aqueduct – completed in 2019/20 • Glen Burn Aqueduct – this project was procured and returned a cost in excess of £250k, review of funding opportunities and budget required to deliver;

In addition, the following projects were postponed due to a lack of resource available to manage the scoping and procurement of the projects:

• Cairnbaan Swing Bridge Improvements Phase 1; • Gairlochy Swing Bridge Improvements

Appendix B Asset Failures

Canal Location Damage Reported Interim Measures Final Measures Forth & Clyde Bowling Sea lock Broken actuator Canal initially Actuator arm arm on closed to replaced, lead in downstream gates navigation, order time of 10 subsequently weeks for moved to manual replacement operation Crinan Lock 1 – Crinan Sea Sluice Failure on Initial response Sluice replaced Lock downstream gate was attempted to with diving support mitigate the and canal reopened problem and to traffic after 10 maintain day closure. operation. However, ultimate failure lead to closure of canal.

BM/13/APR/2020 COMMERCIAL MONITORING

EXECUTIVE DIRECTOR SPONSOR: Richard Millar

Q4 ESTATES, COMMERCIAL AND OPERATIONS REPORT Purpose

This briefing paper provides the Board with a progress update on the delivery of the commercial, estates and operational objectives set out in the 2019/20 business plan. Priority

Routine

Background

This paper forms the basis of the agreed format for SC Board reporting.

Key Issues

The key issues for the last quarter are listed below; Covid-19: The emergence of the Covid-19 pandemic during Q4 of 2019/20 has had a significant effect across the estates, destinations and operational portfolios. Early indications are that losses of c£100k have been encountered within the period, however these losses are anticipated to increase significantly during Q1 and Q2 of 2020/21. The team are fully focussed on mitigating and managing this situation. Overall Financial Performance As highlighted in Appendix A, the Estates and Regeneration budget has delivered a positive contribution in line with original business plan, destinations have had a challenging year with £416k less of a contribution than originally planned. Both Lowlands and Highlands Canals have significantly changed their operating models and reduced spend unlocking c£301k of revenue back to the business. Estates: The estates team are fully focused on maintaining and where possible increasing revenue generation during these challenging times:

Book Asset Valuation The full year BAV has been completed by newly appointed consultants, Gerald Eve, reporting a Total Asset Value, as at 31st March of £29,653,700. This is a substantial increase on the previous year’s figure of circa £19.4m (reported 31 March 2019) and the mid-year BAV of circa £19.6m (30 September 2019), due in the main to the addition of the development site at Dundashill and an increased valuation of Falkirk Wheel site.

The Boathouse, Auchinstarry Having operated under a management agreement for the last 12 months this restaurant property has been formally marketed for lease. Two proposals were received, one from the current Operator and the other from Melrose Hospitality Limited (MHL) who are experienced licensed trade operators. The EMT have approved our recommendation to progress with the preferred offer from MHL and terms are currently being finalised prior to solicitors being instructed. In light of Covid-19 entry will be delayed but the tenant is still keen to progress.

100 Borron Street This investment property continues to perform with occupancy levels established at 75% generating an annual rent of £705k for the joint venture partnership. Two significant transactions have been achieved in recent months; the lease of unit 3 to Daw signs saw the occupation of a 30,000 sqft industrial unit after a vacancy in excess of ten years and securing an annual rent of £120k. More recently we have secured an extension of the lease to Glasgow City Council over approx. 30,000 sqft of office accommodation securing an annual income of £274k until March 2024. Discussions continue with GCC with a view to negotiating a long term lease over the space.

The Edinburgh Boatel Scottish Government granted this commercial operator planning consent at appeal to moor five hotel boats at Boroughmuir, Edinburgh following refusal of the initial planning application in May 2019. SC are now in detailed discussions with the operator to finalise Heads of Terms and agree timescales. It is anticipated it will be 12-18 months before boats arrive on the water as they are currently being designed for bespoke build.

Old Basin House, Applecross This heritage building (former canal house) has recently been fully refurbished with the benefit of heritage funding and investment from SC and has now been let to Gathering Ground who are a community based organisation that create community spaces and use food as a platform to encourage creative learning and cultural integration. The lease provides an annual rent of £5k but importantly brings activity, security and community benefit to Possil. The date of entry will be confirmed once current government restrictions have been lifted.

Natural Retreats (now The UK Great Travel Company) At its meeting on 30th January 2020 the Board approved the recommendation to let the majority of the properties for residential purposes once SC regains possession. Unfortunately, the tenant company was placed in administration on 3rd February 2020 and whilst the administrators confirm they are seeking to disclaim their interest in the lease, this has delayed the return of the properties while the administration progresses. Our solicitors are engaged with the administrators but the current lockdown has slowed matters considerably and possession of the properties currently lies with the administrators.

A claim has been submitted to the administrators for the full amount of arrears (£188k) plus an allowance for dilapidations. However, this will rank as an unsecured claim with little likelihood of material recovery.

Regeneration and Development:

Dundas Hill – Scottish Canals awaits direction from Scottish Government regarding the funding related to the Board’s approved Development Strategy for the site. Once this is provided an options paper will be produced.

Lock 16 / Barrs Community Hub, Falkirk - Following the Board’s decision in March to finalise the first phase of works only, progress on design development for the fit-out for SC has been suspended.

Site works ceased on the project on 24th March due to Covid-19 restrictions. The estimated cost of the shut-down to the project is £5k per week and the project team are focussed on minimise these costs.

A further update report on Options for Lock 16 is to be brought back to the Board in Autumn 2020. An option appraisal is being developed, however market testing has been delayed due to the present Covid-19 situation.

Carse Centre, Inverness Following the Board’s decision in March to seek further advice before reviewing the project again in June 2020, discussions are continuing with agents to secure additional advice on office demand and rental values in the Inverness area. Discussions are ongoing with all funders regarding delaying the grant drawdown during 2020/21. ClayPits, Glasgow Site works ceased on this significant £6m project on 23rd March due to the Covid-19 restrictions. Vesting certificates are being sought for all off site materials. Costs for temporary cessation of works, security and other standing costs as well as necessary interventions are in the process of being determined with Mackenzie Construction. Discussions are ongoing with funders for extension of time and potentially additional investment support.

Sighthill Enterprise Wharf Following a year end project review the Directors concluded that this project was no longer a viable proposition. This decision was taken upon reflection of the gap between the lowest tender price (£1.9m) and the available budget (circa £1m). This decision has been shared with GCC who would still like to explore an alternative delivery model with SC including utilising the potential role of the Glasgow Canal Coop.

Destinations:

Falkirk Wheel The Falkirk Wheel visitor centre was experiencing a successful Q4 (3% up year on year) until Covid-19 began to effect visitations in late February. Present loss of income due to Covid-19 in late February/ March is c£46k. Work on the new Mini Golf development was suspended as a result of Lockdown.

Caledonian Canal Centre Profitability of the centre has improved from the previous year, however performance remained slightly behind business plan and Covid-19 has had an impact. The centre achieved a profit of £38k compared to an original business plan projection of £42k.

Ardrishaig Harbour Steamer Terminal and Eggshed have been mothballed to reduce losses during the Covid-19 shutdown. The Executive continue to work with the Destinations team to develop future options for these projects.

Bowling Harbour The project to transform Customs House into holiday accommodation is nearing completion with the majority of the works complete. The final stages have been delayed as a result of Covid-19 shutdown. Works on the Bowling restaurant plans have been stopped, awaiting a further comprehensive review by the project team.

Operations: With the announcement of the Covid-19 lockdown on March 23rd all Canals team had to close the canals swiftly, efficiently and safely. Critical works such as water control, safety checks and residential customer services continue under a permit process and working practices have been fully revised to take account of Covid-19 precautions.

Works are progressing during lock-down, focusing on maximising opportunities for remote working, undertaking a review our operational compliance, monitoring operational risk across the canal network and planning to address them within the current restrictions and planning for a safe and speedy re-opening.

Caledonian Canal Significant savings (£130k) have been achieved on the Caledonian Canal due to the revised staff operating model, these new working arrangements will continue to be developed during 20/21 with the objective of developing further efficiencies. Staff have been engaged in the development of these plans.

The Caledonian Canal has remained closed as a result of the Covid-19 lockdown and we continue to work proactively with our residential/ leisure and commercial customers during these challenging times.

Crinan Canal Similar to the Caledonian, the revised working patterns on the Crinan have unlocked significant savings (£56k). The local team continue to work proactively with management to refine the plans and ensure customer service is at the forefront all changes. Freight income from the timber pier remains challenging and SC are engaged with the industry to ensure the pier remains competitive.

A canal transit marketing campaign is planned for an appropriate time post Covid-19 lockdown

Lowlands Canals A new planning regime, developed in partnership with the Asset team has ensured that the Lowlands team have been fully deployed on planned works right up until the shutdown. This has been a highly productive quarter. Partnership between the operations team and the volunteer cohort has seen a number of very successful volunteer days achieve significant canal improvements.

Corporate Implications

Strategic Priorities: The continuation of these strategic deliverables continue, against the 2019 business plan with the variations against budget recognised, understood and subsequently managed.

 Risk/Risk Appetite: Each department has an up to date risk register and the implications of Covid-19 to our business has been fully documented.

 Legal: Natural Retreats provides the main risk at the current time.

 Financial: Covid-19 has had a significant effect on a number of regeneration projects, requiring closure of construction works which will result in significant costs up to c£32k per month whilst lockdown continues. It has also reduced income at destinations in late Feb and March c£68k. It is clear these implications will continue and we anticipate further significant losses in 2020/21 in our transit, property, freight & destination markets. We are working closely with funders in searching for additional support.

 Human Resources: The impact of Covid-19 on staff morale cannot be underestimated. This is being mitigated through regular cross business communication.

 Fair Work First: No impact.

 Communication: Comprehensive communications are in place with all staff during the Covid-19 shutdown.

 Community & Third Sector: Agreement with Gathering Ground for the letting of Old Basin House in Glasgow - this social enterprise will offer cooking courses to local North Glasgow residents.

 Commercial: The commercial aspects have been highlighted in the paper

 Asset: There are no impacts

Conclusions and Recommendations

This paper is for noting.

Author: Richard Millar Title: Director of Infrastructure Date: 15 April 2020

BM14/APR/2020 CORPORATE NOTING

EXECUTIVE DIRECTOR SPONSOR: DAVID BLAIR

Q4 COMMUNICATIONS & ENGAGEMENT REPORT

Purpose

The Board is asked to note the communications, marketing and stakeholder engagement activity undertaken in the last quarter and note that all planned events are on hold.

Priority

Routine.

Background

Reporting against five areas within Scottish Canals’ Communications and Marketing Strategy 2017-20, the following was achieved during this quarter:

Leading online conversations (engaging new and existing tourists, customers & stakeholders in relevant online activity) – Scottish Canals is working to a dedicated communications plan to keep customers, staff and other stakeholders updated throughout covid-19 and plan ahead for when lockdown ends. This includes creating video content and blog pieces for customers (Twitter & Facebook), staff (Yammer) and partners (Linkedin) with #BeatTheBoredom material being developed to keep the public interested in Scotland’s canals until the lockdown ends.

Building brands that deliver (creating strong identities to effectively market products & services) – launched the five-year Giant Strides Marine Tourism Strategy in March with Royal Yachting Association Scotland, British Marine and SailScotland to deliver £500m of economic value through a robust marine sector by 2025. Strong social media engagement also saw Scottish Canals attract over 300 new followers during March 2020.

Empowering communities of interest (engaging influencers as canal ambassadors) – established Staff Survey Working Group in January 2020 with representatives from across Scottish Canals to review survey findings and develop an Action Plan to address issues raised. Results have been shared with all employees and Action Plan due to be published in Spring 2020. Scottish Canals is seeing more staff engaging with Yammer and Team Huddles now that majority of workforce is having to use this technology while working from home.

Bringing new people to the canals (delivering paid-for and free events that attract new audiences) – attracted 300 people to the Loading Bay skate park launch in North Glasgow on 8th February 2020 in partnership with The Skinny. RedBull confirmed Neptune Steps swimming race in North Glasgow in 2020 was being doubled in scale rather than mothballed (event now postponed).

Magnifying volume of news (promoting Scotland’s canals in innovative ways) – trained staff in Inverness, Fort Augustus & Glasgow on social media management in February 2020 to increase content, customer responsiveness & ensure best practice across Scottish Canals’ Facebook, Twitter and Instagram accounts.

Key Issues

The covid-19 lockdown is the biggest issue to have emerged since the end of Q4. Scottish Canals is delivering against a communications plan approved by the BCP Gold Command Group which sets out the frequency, means and content for engaging with staff, customers and partners. In addition, a covid-19 hub has now been created on the Scottish Canals’ website featuring FAQs, Scottish Canals’ updates and an online for deferred payment requests. Following requests from a number of boating customers, councillors and other stakeholders to limit towpath usage, Scottish Canals created a series of posters for busy locations urging people to stay at home. Additional material has been distributed across the canal network urging people to following government guidance.

Corporate Implications

 Strategic Priorities: Effective, consistent and professional communications are required to communicate effectively with stakeholders during COVID-19.

 Risk/Risk Appetite: Managing reputational risk, particularly with staff and customers during a rapidly changing pandemic requires focussed, timely communications, regular engagement and consistent messaging.

 Legal: Nothing to note

 Financial: Deferred payment option will impact on income

 Human Resources: Line Managers are being asked to allow team members the time needed to participate in the Staff Survey Working Group. Requirement for staff to use online tools during lockdown is improving engagement in wider corporate communications channels.

 Fair Play: Nothing to note.

 Communication: Included in commentary

 Community & Third Sector: Nothing to note

 Commercial: No marketing activity is being undertaken for destinations or boating services as visitor centres and canal operations are suspended.

 Asset: Nothing to note

Conclusions and Recommendations

The Board is asked to note the content of this paper.

Author: Josie Saunders Title: Head of Corporate Affairs Date: 13th April 2020

BM/15/APR/2020 CORPORATE NOTING EXECUTIVE DIRECTOR SPONSOR: DAVID BLAIR

CORPORATE RISK

Purpose

The purpose of this paper is to provide the Board with an update on the current risk management framework; and report on current risks escalated to the Corporate Risk Register. The EMT have considered the contents of this paper.

Priority

Routine.

Background

As directed by the Board, the Executive Management Team (EMT) is undertaking a Corporate Risk process review, informed by the internal audit of risk management and with expert input from Rob McGregor, Non-Executive Member.

Key Issues

The ARC continues with its strategic focus on the risk framework in accordance with its terms of reference and proposed amendments to the current risk appetite/policy and risk assurance map.

The identification processes to improve management of the underlying causes of risks is ongoing in addition to a review of the Corporate Risk Register to distinguish corporate risks, to be mitigated with appropriate controls, from issues being actively managed.

The EMT approved the recruitment of additional resource and interviews by video conference of short-listed candidates for the role of Corporate Risk, Compliance and Business Continuity Manager are planned for 17 April 2020.

The current Corporate Risk Register is attached. This reflects corporate risks faced by Scottish Canals in response to the key operational/departmental risks currently being managed at departmental level.

A full update of policy, templates and processes is scheduled for the June ARC and Board meetings. Some early updates to the core risk register template have been incorporated here.

Escalating Risks

Significant increasing risks added to the Corporate Risk Register since the last Board review are:

1. the impact of COVID-19 on our staff, customers and business. Current controls in response to the impact of COVID-19 are based on scenario planning and Business Continuity Plans for each function of the business in response to Government guidance; and

2. the potential future litigation issue with HMRC regarding their assessment of Scottish Canals’ VAT recovery position.

Corporate Implications

 Strategic Priorities: The risk register details issues/matters that have an impact on delivery of our core business objectives and/or legal obligations.

 Risk/Risk Appetite: This paper and annex details the risk appetite and risks.

 Legal: legal implications are detailed in the paper.

 Financial: financial implications are detailed within the risks in the risk register.

 Human Resources: There are no HR issues created from this paper, however, notable HR risks are detailed in the risk register.

 Fair work first: Elements of this will be touched upon in the risks associated with JE.

 Communication: There are no communication issues associated with the paper, but these are part of the risk/actions within the risk register.

 Community & Third Sector: There are no areas to note in this paper.

 Commercial: There are no commercial issues associated with the paper, however, commercial matter are contained within the risk register.

 Asset: There are no asset issues associated with the paper, however, asset matters are contained within the risk register.

Conclusions and Recommendations

The Board to note the:

 update on the current risk management framework review; and  current risks identified in the Corporate Risk Register.

Author: Nicola Christie Title: Head of Legal Services Date: 16 April 2020