The members present their annual report and financial statements for the year ended 31 March 2024.
The principal activity of the limited liability partnership continued to be that of providing loan finance to social sector organisations based or operating in Scotland.
Each member's subscription to the capital of the LLP is determined by their share of the profit and is repayable following retirement from the LLP.
Details of changes in members' capital in the year ended 31 March 2024 are set out in the financial statements.
The members who held office during the year and up to the date of signature were as follows:
The auditor, Henderson Loggie LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Each of the members in office at the date of approval of this annual report confirms that:
so far as the members are aware, there is no relevant audit information of which the limited liability partnership's auditor is unaware, and
the members have taken all the steps that they ought to have taken as members in order to make themselves aware of any relevant audit information and to establish that the limited liability partnership's auditor is aware of that information.
The members are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law (as applied by The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008) requires the members to prepare financial statements for each financial year. Under that law the members have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice. Under company law (as applied by The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008) the members must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the limited liability partnership and of the profit or loss of the limited liability partnership for that year. In preparing these financial statements, the members are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the limited liability partnership will continue in business.
The members are responsible for keeping adequate accounting records that are sufficient to show and explain the limited liability partnership’s transactions and disclose with reasonable accuracy at any time the financial position of the limited liability partnership and enable them to ensure that the financial statements comply with the Companies Act 2006 (as applied by The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008). They are also responsible for safeguarding the assets of the limited liability partnership and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
We have audited the financial statements of Social Growth Fund LLP (the 'limited liability partnership') for the year ended 31 March 2024 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the limited liability partnership in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the members' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the limited liability partnership’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the members with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The members are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 as applied to limited liability partnerships requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the members' responsibilities statement, the members are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the members determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the members are responsible for assessing the limited liability partnership's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the members either intend to liquidate the limited liability partnership or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud, are detailed below.
As part of our planning process:
We enquired of management the systems and controls the limited liability partnership has in place, the areas of the financial statements that are mostly susceptible to the risk of irregularities and fraud, and whether there was any known, suspected or alleged fraud. Management informed us that there were no instances of known, suspected or alleged fraud;
We obtained an understanding of the legal and regulatory frameworks applicable to the company. We determined that the following were most relevant: Data Protection Act 2018 and compliance with the UK Companies Act 2006 as applied to limited liability partnerships.
We considered the incentives and opportunities that exist in the limited liability partnership, including the extent of management bias, which present a potential for irregularities and fraud to be perpetrated, and tailored our risk assessment accordingly; and
Using our knowledge of the limited liability partnership, together with the discussions held with management at the planning stage, we formed a conclusion on the risk of misstatement due to irregularities including fraud and tailored our procedures according to this risk assessment.
The key procedures we undertook to detect irregularities including fraud during the course of the audit included:
Enquiries with management about any known or suspected instances of non-compliance with laws and regulations and fraud;
Reviewing senior leadership team meeting minutes;
Challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to provisions against concessionary loans; and
Auditing the risk of management override of controls, including through testing journal entries and other adjustments for appropriateness.
Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements in the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). For instance, the further removed non-compliance is from the events and transactions reflected in the financial statements, the less likely the auditor is to become aware of it or to recognise the non-compliance.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the limited liability partnership's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006 as applied by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008. Our audit work has been undertaken so that we might state to the limited liability partnership's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the limited liability partnership and the limited liability partnership's members as a body, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
Social Growth Fund LLP is a limited liability partnership incorporated in Scotland. The registered office is 3rd Floor, 27 George Street, Edinburgh, EH2 2PA.
The limited liability partnership's principal activities are disclosed in the Members' Report.
These financial statements have been prepared in accordance with the Statement of Recommended Practice "Accounting by Limited Liability Partnerships" issued in December 2021, together with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the limited liability partnership. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
This limited liability partnership is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this limited liability partnership, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The limited liability partnership has therefore taken advantage of exemptions from the following disclosure requirements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The financial statements of the company are consolidated in the financial statements of Social Investment Scotland for the year ended 31 March 2024. These consolidated financial statements are available from its registered office, 3rd Floor, 27 George Street, Edinburgh, EH2 2PA.
The members are of the opinion that the limited liability partnership can meet its obligations as they fall due for the foreseeable future. The Fund is now closed for new investment and so principal risks are centred around monitoring the performance of the existing portfolio. Support and restructures are provided to portfolio customers where possible to secure impact of the Fund and reduce future losses on Fund returns. Taking into account the position of the Fund and the operational model, the financial statements have been prepared on the going concern basis.
The turnover shown in the statement of comprehensive income represents interest receivable on loan advances during the period in respect of the limited liability partnership's principal activity of the provision of loan finance to social economy organisations based or operating in Scotland.
A member's shares in the profit and loss for the year is accounted for as an allocation of profits. Unallocated profits and losses are included within "other reserves."
All amounts due to members that are classified as liabilities are presented within 'Loans and other debts due to members' and, where such an amount relates to current year profits, they are recognised within ‘Members' remuneration charged as an expense’ in arriving at the relevant year’s result. Undivided amounts that are classified as equity are shown within ‘Members' other interests’. Amounts recoverable from members are presented as debtors and shown as amounts due from members within members’ interests.
Where there exists an asset and liability component in respect of an individual member’s participation rights, they are presented on a gross basis unless the LLP has both a legally enforceable right to set off the recognised amounts, and it intends either to settle on a net basis or to settle and realise these amounts simultaneously, in which case they are presented net.
Once an unavoidable obligation has been created in favour of members through allocation of profits or other means, any undrawn profits remaining at the reporting date are shown as ‘Loans and other debts due to members’ to the extent they exceed debts due from a specific member.
The limited liability partnership has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
The LLP only enters into basic financial transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and other third parties, loans to related parties and amounts due to members.
Specific provisions against loan advances are recognised when risk of non-recoverability is identified, as a result of regular monitoring and review by the designated members. Provisions made during the year, less amounts released, are charged to the profit and loss account and are netted off against advances reported in the balance sheet.
Concessionary loans
The loans issued by Social Growth Fund LLP, as a member of a public benefit entity group, are deemed to be concessionary loans. Concessionary loans are initially measured at the amount paid. Subsequent to initial recognition, the carrying amount of concessionary loans at the reporting date is adjusted to reflect any repayments, accrued interest and impairments.
In the application of the limited liability partnership's accounting policies, the members are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The only accounting judgement or significant estimate deemed to be required in preparing these accounts, relates to the recognition of provisions against concessionary loans. The members are satisfied that accounting policies are appropriate and applied correctly.
An analysis of the limited liability partnership's turnover is as follows:
Included within administrative expenses is a charge/(reversal) of a bad debt provision amounting to (£50,000) (2023: £2,838).
In common with many other businesses of our size and nature we use our auditor to prepare and submit returns to the tax authorities and assist with the preparation of the financial statements.
The auditor's remuneration is settled by Social Investment Scotland, the ultimate controlling party.
The LLP had no employees during the period (2023: nil).
Interest is charged on concessionary loans at a rate of 4% - 10%. Security is held over certain loans by way of a floating charge over assets of the relevant company.
A provision of £773,035 (2023: £773,035) has been recognised against concessionary loans.
Social Investment Scotland and Better Society Capital each made a contribution of £nil (2023: £nil) in the year, and £383,607 (2023: £645,047) was repaid to each of them in the year. A total of £3,402,304 (2023: £3,785,911) was owed to both members at the end of the year. Per the members agreement the Fund can draw down a total of £15,999,990 from Social Investment Scotland and Better Society Capital. The loans will not be repaid until Social Growth Fund LLP's customers have paid back more of their loans and at such times the LLP board determines. No loans were made by SIS Community Finance in the current year or the prior period.
Equity capital was contributed by two of the members upon the incorporation of the limited liability partnership in 2017 - £100 by Social Investment Scotland and £1 by SIS Community Finance. No equity capital was contributed in the current or prior period.
A management charge of £69,201 (2023: £79,108), payable to Social Investment Scotland, was paid by the limited liability partnership in the year under the terms of the partnership agreement. The balance owed at the end of the period was £nil (2023: £1,560).
In the opinion of the members there is no ultimate controlling party as defined by Financial Reporting Standard 102.