Agenda item

[To receive the Annual Audit Letter provided by Grant Thornton]

Mark Stocks from the Council’s external auditors, Grant Thornton presented the Annual Audit Letter that summarised the key findings from their work at the Council’s subsidiary groups and the West Midlands Pension Fund for the year ending 31 March 2018. He informed the Committee that an unqualified opinion had been issued on the group financial statements and on the Pension Fund and that no statutory powers had been used. An unqualified opinion had also been issued on the Value for Money work. The Committee was also informed that on 23 July 2018 when Grant Thornton reported on the main findings of their audit to the Committee, they did not have the information on issues arising from the audit of the Fund’s accounts.  The Pension Fund audit was undertaken by a different auditor within Grant Thornton. The external auditor highlighted a couple of issues related to reconciling contributions which led to adjustments to the accounts and controls being strengthened.  Changes to the accounts were agreed with the Chair of the Pensions Committee and the Chair of the Audit and Risk Committee. There was no loss to the Council as a result of the adjustments. The changes were financial movements between years. Grant Thornton had discussed with Claire Nye, Director of Finance going forwards that they would change how they work with regards to the Pension Fund audit to ensure when they present the Statement of Accounts to the Audit and Risk Committee there are be no unresolved issues. Grant Thornton concluded by putting the issues highlighted in the Pensions Fund audit in the context of the Fund being a £15 billion business and in the top five of the largest public-sector pensions funds in the country.

Councillor Philip Bateman MBE welcomed the external auditors Annual Audit Letter. He commented that the Pension service was an area the Committee should be concerned about as the value of the issues/adjustments identified throughout the audit of the Pension Fund accounts were not small. He suggested that there was a reputational issue for the Council. He hoped the issues highlighted from the audit were a one-off and that they would not be replicated in the following years audit. He asked whether at some stage the Committee could have an in-depth discussion on the Pension Fund and the way it had been affected by the changes it had gone through during the 2017/2018 financial year.

Grant Thornton reported that the Pensions service had cause little or no problems during the audit of the Fund’s accounts in the past and the issues identified during the 2017/2018 audit were all unexpected. He was happy with the way that the Council and the Pensions Fund have responded.

The Director of Finance gave an update on action taken to address the causes of the issues highlighted from the audit of the Pension Fund accounts. She informed the Committee that she was the section 151 Officer for the West Midlands Pension Fund. She had spent time with colleagues at the Fund to see the difficulties they had and discuss how to put them right.  There had been huge change in staffing within the Finance team at the Fund, with staff transferring to LGPS Central Ltd.  There was huge pressure, with changes in systems and processes and arrangements for the transition to LGPS Central. The team have since drawn up their own self-assessment and action plan. One main issue is they now have a full team in place. If they had been in place earlier, the audit would have gone smoother. The Director of Finance also reported that she would be meeting with the Pensions Finance team every month to offer support and discuss progress. Measures are in place and she did not anticipate the problems reoccurring in the future.

Mike Ager, Independent Member asked how the positive aspects of the audit of the Pension Fund accounts would be communicated to the other local authorities who are members of the Fund. Grant Thornton advised that the Audit Letter is presented to the Pensions Committee which comprised representatives from the seven West Midlands District Councils. The Director of Finance added that the Audit Letter was presented to the Pensions Committee on 5 September 2018. In her capacity as Director of Finance she also met with her counterparts within the West Midlands Councils and would feedback to them regarding the Pension Fund audit.

The Chair added that the West Midlands Pension Fund was also discussed at the West Midlands Combined Authority Audit and Risk Committee.

Referring to the value for money conclusion, particularly the risk area Strategic Asset Management (SAM), Mike Ager, Independent Member asked whether the Strategy, Policy and Action Plan documents had been finalised. The Director of Finance undertook to confirm the position and circulate a note in response.

Further to the value for money conclusion, the Chair asked Grant Thornton what they would be looking for during their audit work on the Civic Halls in 2019. Grant Thornton reported that they would need to understand how the Council responds and manages from this position regarding the costs of the program, any action the Council takes in terms of advisors, and what the project would look like once it was delivered.

Resolved:

That the Annual Audit Letter provided by Grant Thornton be noted.