Agenda item

The purpose of this report is to update the Pension Board on the draft audit findings of the External Auditor.

Beth Bowers, Senior Manager, Grant Thornton introduced this item to the Board. She explained that the pension fund’s report was in its final draft stage, subject to a small piece of procedural work relating to the Council’s audit and the value of their infrastructure assets. She added that a Statutory Instrument was currently progressing through Parliament and that a decision was due to be made by the end of the year.

She referred the Board to the four significant risks identified in the Audit Plan.

Management override of controls

Our testing of estimates, judgements and journals has not identified any evidence of management override of controls.

Improper revenue recognition (rebutted)

Our audit work has not identified any issues in respect of improper revenue recognition.

Valuation of Level 3 investments

Our audit work has not identified any significant issues in relation to this risk.

Expenditure recorded includes fraudulent transactions (rebutted)

Our audit work has not identified any issues in respect of improper expenditure recognition.

She highlighted the following further areas from the report.

Level 3 Investments: £1,312m

Our findings identified some estimation differences due to timing issues. The total aggregate difference identified was a potential overstatement of the estimates by £8.6m.

Level 2 Investments: £4,217m

Similarly to level 3, we identified some estimation differences. Most of these were not above our trivial threshold. The total aggregate difference identified was a potential understatement of the estimates by £9.3m.

Independence and ethics

Audit of Brunel Pension Partnership Limited (BPP) – We do not consider the audit of BPP as a threat to our independence as Avon Pension Fund cannot exercise control over BPP.

Fees

The Fund disclosed Audit Fees relating to 2021/22 of £41,655 in its statements. Our proposed fees for 2021/22 are £53, 655. The difference of £12,000 relates to the proposed additional fees included in the report.

The Fund disclosed Audit Related Fees relating to 2021/22 of £7,000 in its statements. Our proposed fees for 2021/22 are £12,000. The difference of £5,000 relates to the proposed additional fees included in the report.

The proposed fees for our IAS 19 letters of assurance to admitted body auditors has increased by £5,000 since planning. This reflects the additional work undertaken this year to enable us as a Pension Fund auditor to respond to the increased number of areas of assurance sought by the admitted body auditors. We anticipate these higher fees to continue going forward.

The Chair asked if any changes were planned for the CIPFA framework.

Beth Bowers replied that no significant changes to the code for Funds was planned for 2022/23.

Steve Harman commented that whilst understanding the majority of the report that it was a complicated report to navigate. He asked if there was anything that could be done to enable members of the Fund to understand it easier / have clarity.

Beth Bowers agreed that it was a technical report, but said that comfort should be assured in their findings.

The Chair asked if the teams involved in the audit at Grant Thornton and the Council were likely to change within the coming year.

Beth Bowers replied that a contract had been agreed for 2023/24 and that they were in the process of arranging the portfolios for 2022/23. She said that it was likely that either herself or Peter Barber would retain working with the Avon Pension Fund.

She added that for the audit in 2023/24 they would look to ensure that not all of the previous key auditors would rotate away from working on the Avon Pension Fund.

The Group Manager for Funding, Investment & Risk said that she was not aware of any forthcoming changes within the Council team and added that the continuity offered from Grant Thornton really does help.

The Director, One West asked if context could be given to the 150% increase in fees.

Beth Bowers replied that a small increase was due for 2022/23 and then as part of the new contract for 2023/24 they would increase further. She said that the increase would give more certainty of actual fees and reduce the amount of unknown factors. She added that standards of auditing have increased vastly along with the time they take to complete, in 2018/19 it was three weeks and this current one had been two months.

David Yorath commented that the report contained a lot of information and that he would welcome a summary of key facts if possible in the future.

The Head of Pensions said that if it is possible they would try to summarise the key findings in some way and would work with Grant Thornton on this if necessary.

Alison Wyatt asked if Grant Thornton had been happy with the management responses received.

Beth Bowers replied that all the findings had been accepted and that they had received very detailed responses. She thanked the Finance & Systems Manager (Pensions) and others within the team for all their work.

The Board RESOLVED to note the report.