RED BOOK VALUATIONS Practical points for public sector valuers on compliance, governance, audit trails and responsible use of AI
 | Donna is a Professional Support and Assurance Technical Specialist for Valuation at RICS, working with valuers and firms across the UK and Ireland to support professional standards, regulatory compliance and good valuation practice. |
Local authority valuations sit at the intersection of professional standards, public accountability and increasingly sophisticated technology. Drawing on a recent presentation to the ACES Eastern Branch, this article explores what full Red Book compliance means in practice, where public sector judgement is needed, and how valuers can build a clear, defensible audit trail. “The Red Book should not be viewed as a compliance checklist. It provides a framework for making professional judgement visible.” |
At a glance
• Published financial statement valuations require full mandatory Red Book compliance
• The absence of mandatory public sector rotation provisions does not remove the need for an appropriate rotation policy, disclosure and governance
• A clear scope of work and a comprehensive audit trail reduce ambiguity and audit challenge
• AI changes the tools, not the valuer’s responsibility for professional judgement and defensible outputs.
A framework built around public confidence
RICS Valuation – Global Standards, (the Red Book), provides the framework within which RICS members undertake written valuation work. The edition, effective from 31 January 2025, brings together mandatory professional standards, mandatory valuation technical and performance standards, valuation practice guidance applications, and the International Valuation Standards.
For local authority valuers, the UK national supplement is particularly important. It includes guidance on financial reporting, local authority asset valuations, and the existing use value basis. The practical message is that the Global Standards and the UK material should be read together, rather than treated as separate sources.
PS 1, PS 2 and VPS 1 to VPS 6 are mandatory where an RICS member undertakes or supervises written valuation advice, subject to the defined exceptions in PS 1. Registered Valuers must also comply with the requirements of the RICS Valuer Registration Scheme.
Does a local authority need to become an RICS-regulated firm?
Not necessarily. A useful starting point is whether the authority provides valuation services to fee paying clients. Where work is solely for the authority’s own use, a Sponsoring Non-Regulated Organisation arrangement may be appropriate. This enables the authority to sponsor its Registered Valuers and manage registration fees without becoming an RICS-regulated firm. If services are provided to fee paying clients, the authority should seek advice on the correct registration status.
Independence, conflicts and rotation
PS 2 addresses professional and ethical standards, qualification, independence, confidentiality, conflicts of interest, disclosures, valuation review, and responsibility for the valuation. These are not abstract principles. They require evidence in the file and, where relevant, clear communication to clients and users.
Conflict checks should be systematic and recorded. A repeat instruction may also trigger disclosure requirements where the public has an interest, or third parties may rely on the valuation. The relevant disclosure should appear in the terms of engagement, the valuation report, and any published reference. It should explain the relationship with the client and previous involvement, the period for which the valuer has acted as signatory, and the rotation arrangements.
Rotation in the public sector
Mandatory UK rotation provisions apply to certain Regulated Purpose Valuations, but they do not apply to UK public sector financial reporting valuations. This does not, however, remove the need for appropriate governance. As a matter of good practice, public sector bodies should consider rotating the responsible valuer at intervals not exceeding seven years (although as per PS 2 5.4.4 this is not mandatory), document and disclose their rotation arrangements, and state the valuer’s previous involvement and period as signatory. Where rotation is impracticable, proportionate safeguards may include the use of valuation panels, independent peer review, documented challenge and oversight, and a clear audit trail.
Key distinction
The absence of mandatory UK Regulated Purpose Valuation rotation provisions does not remove the need to consider independence, disclosure, rotation policy and proportionate safeguards.
Responsibility must be visible in the file
A named, appropriately qualified valuer, must prepare the valuation, or supervise its preparation, and accept responsibility for it. If others provide material assistance, the report should identify who assisted, the nature of that assistance, and the extent of reliance.
In addition, the supporting audit trail should clearly evidence the supervision undertaken. This may include records of inspection attendance or the last inspection date, emails requesting amendments or further information, minutes of review discussions, and tracked changes or other documented review activity.
Published accounts mean full compliance
For valuations prepared for inclusion in published financial statements, the position is clear: Valuations prepared for inclusion in published financial statements require full mandatory compliance with PS 1, PS 2 and VPS 1 to VPS 6. The CIPFA Code also requires valuations to follow the current “RICS Valuation – Global Standards: UK national supplement”.
This is important because local authority valuation instructions can sometimes be framed as routine annual exercises. In professional standards terms, however, they are anything but routine.
PS 2 section 5, which addresses disclosures where the public has an interest or third parties may rely, is also relevant to these asset valuations.
Although individual valuation reports and asset values may not themselves be published, the resulting figures or disclosures may be incorporated into published financial statements. Members should therefore consider the disclosure requirements carefully and ensure that any required information is included in the terms of engagement, the valuation report and any published reference to the valuation.
Start well: make the instruction precise
VPS 1 identifies the matters that terms of engagement must address. For asset valuation programmes, further clarity at the instruction stage can prevent later disagreement, unexpected additional work, or need for clarification. Additional useful matters on which to seek clarity from the client and to settle include:
• The asset categories, required outputs, work outside the rolling programme, and changes of use or category
• Materiality, service potential, economic and useful lives, required land and building split and componentisation policy
• The treatment of assets not valued in the year, significant capital expenditure and possible impairment events
• Timescales, deadlines, named contacts and responsibility for auditor queries and liaison.
Bases, methods and the public sector context
VPS 2 deals with bases of value, assumptions and special assumptions. UK VPGA 4 provides the public sector context, including the bases commonly associated with operational assets, non-operational assets, investment property, assets held for sale and heritage assets. The selected basis must be appropriate to the asset category, and assumptions should be made explicit rather than left implicit in working papers.
Under VPS 3, the valuer must select and justify the valuation approach and method. The choice should have regard to the nature of the asset or liability, the purpose and intended use of the assignment, and any statutory or other mandatory jurisdictional requirements.
Inspection, investigation and evidence
VPS 4 requires inspections and investigations to the extent necessary to produce a valuation that is professionally adequate for its purpose. A decision not to inspect must not introduce an unacceptable degree of risk. Information relied upon should be verified through reasonable steps, with the source, extent of verification and any limitations made clear.
Common weaknesses include unstructured or illegible site notes, inspection records that are too brief, photographs without accompanying analysis, and third-party information where the source or verification is not recorded. A large photograph library is not, by itself, an audit trail. The file needs narrative, analysis and connection between evidence and conclusion.
For desktop investigations, professional scepticism remains essential. Valuers should consider client transparency, confidentiality and intellectual property, as well as technical reliability. Comparable evidence should be checked and its source recorded. Sustainability and ESG, automated valuation models, data protection and the admissibility of post-dated evidence are also increasingly relevant to the evidence base.
Measurement and records
Where measurement is undertaken or checked, members should have regard to the “International Property Measurement Standards (IPMS: All Buildings)”. Alternatively, the “Code of Measuring Practice, sixth edition”, may be used. Whichever measurement basis is adopted, it should be documented and applied consistently, including when analysing comparable evidence.
At the time of writing, the proposed seventh edition of the “Code of Measuring Practice” was undergoing consultation, which was due to close on 13 October 2026.
VPS 4 requires legible notes of findings and the limits and circumstances of the inspection. Records should include key inputs, calculations, investigations and analyses. The test is practical: could the file support a future review, audit or enquiry without relying on the original valuer’s memory?
Valuation models
A valuation model is the quantitative implementation of a method, in whole or in part, that converts inputs into outputs used in developing a value. A model may be as simple as a calculator or spreadsheet, or it may be more complex, such as a discounted cash flow model incorporating multiple cashflow periods, growth assumptions and discount rates. Models may also be proprietary, where the calculations are embedded within specialist software such as KEL or ARGUS.
VPS 5 requires that where complex or proprietary models are used, they must be suitable for the valuation purpose, and the relevant provisions of IVS 105 should be considered and applied. Outputs should be tested and analysed, and users should understand how the model works and the assumptions that drive its results. Software can support analysis, but it cannot replace professional judgement or scepticism. The key inputs, validation checks and challenge applied to the output should all be evident in the audit trail and form part of the quality assurance process.
Reporting and genuine exceptions
VPS 6 provides the reporting framework. Among other matters, a valuation report should identify the valuer, client and intended users; explain the purpose; identify the asset and basis of value; state the valuation date and extent of investigation; describe the information relied upon, assumptions and special assumptions; set out restrictions on use and publication; explain the approach and reasoning; report the valuation amount and report date; and address material valuation uncertainty, liability limitations and significant ESG matters where relevant.
PS 1 recognises circumstances in which VPS 1 to VPS 6 may not be suitable, including agency or brokerage, advice for negotiations or impending litigation, the performance of statutory functions, and valuations for internal purposes only. Those are exceptions from specified technical standards, not exemptions from PS 1 and PS 2, or from professional conduct.
For an internal-use exception to be valid, the terms of engagement and written advice should clearly restrict the purpose and use of the advice, prohibit disclosure to another party, make clear that the opinion is not intended for any other purpose, and address liability. This can be particularly relevant where valuation advice is prepared for internal decision makers and includes recommendations (rather than comprising asset valuations for financial statements).
In practice, local authority valuers may assume that advice provided on a confidential basis will remain internal. However, reports can be circulated more widely than originally intended, disclosed inadvertently, released under freedom of information legislation, or otherwise enter the public domain. While each authority will need to determine its own approach and obtain appropriate legal advice where necessary, valuers may wish to consider whether proportionate statements dealing with purpose, use, reliance, and limitation of liability would provide additional clarity should the advice later be seen by a wider audience.
The fundamental question is not whether disclosure was intended, but whether the document makes sufficiently clear who it was prepared for, the purpose for which it was prepared, and the extent to which others are entitled to rely upon it.
AI and automation: professional judgement remains central
Automated valuation models, data scraping, document analysis, report drafting tools and workflow automation are already part of valuation practice. The question is therefore not whether technology will be used, but how it will be governed.
RICS professional guardrails focus on behaviour and judgement rather than the technology itself. The Red Book addresses valuation models, the use of AI and automated data gathering. The RICS professional standard on the responsible use of artificial intelligence in surveying practice seeks transparent, auditable and defensible outputs, stronger procurement and due diligence, reduced risk of harm and continued trust in valuation.
For local authority teams, practical controls include training staff at all levels, understanding the effect of prompts and source material, reviewing outputs rather than accepting them at face value, documenting significant queries and assumptions, and ensuring that confidential or protected information is handled appropriately. “Garbage in, garbage out” remains a useful warning, but so does a second principle: plausible wording is not the same as reliable evidence.
“AI may accelerate the process, but it does not transfer responsibility away from the valuer.”
A practical checklist for local authority teams
AREA | PROMPT FOR THE FILE REVIEW |
Instruction | Are the purpose, intended users, scope, accounting requirements, deadlines and auditor liaison arrangements clear? |
Independence | Are conflict checks, previous involvement, disclosures and rotation arrangements recorded? |
Responsibility | Is the responsible valuer named, and is supervision or material assistance evidenced? |
Evidence | Are inspection notes, sources, verification, limitations, calculations and analysis legible and connected? |
Method and model | Is the approach justified, the method clear and the model understood, tested and suitable, and professional judgement visible? |
Report | Does the final report address the required VPS 6 matters and align with the terms of engagement? |
Technology | Are AI and automated outputs reviewed, auditable, defensible and used within appropriate information controls? |
The overall message
The Red Book should not be viewed as a compliance checklist. It provides a framework for making professional judgement visible: through clear instructions, proportionate investigation, reliable evidence, appropriate modelling, transparent reporting and a coherent audit trail.
Public sector valuation operates within a framework of public accountability. Governance arrangements, disclosures, review procedures, audit trails and proportionate safeguards are not simply administrative requirements. They help preserve confidence in independence and objectivity, support effective audit and scrutiny, and provide important protection for valuers if their professional judgement is later challenged.
As technology continues to develop, the tools used by valuers will change. The principles that underpin trusted valuation advice will not. Transparency, accountability, professional judgement and a defensible audit trail remain at the heart of good valuation practice.
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