Meeting documents

To receive the report.

The Vice Chair invited the Key Audit Partner of Grant Thornton to present the report. He began by noting that it summarised the outcome of the audit work on the pension fund and said that assurance letters had been completed and would be issued. The rest of the audit was substantially complete, with just a few outstanding queries remaining, and he praised the diligence of the Officers in responding to queries from the external auditors, particularly the Service Manager-Investments.

The Vice Chair invited questions from the Committee, and during consideration of the reports, issues/concerns were raised, questions were asked/answered, and further information was provided.

The Audit Committee:

Accepted the report.

The Vice Chair invited the Key Audit Partner of Grant Thornton to present the report.  He began by noting that it summarised the outcome of the audit work on the pension fund and said that assurance letters had been completed and would be issued.  The rest of the audit was substantially complete, with just a few outstanding queries remaining, and he praised the diligence of the Officers in responding to queries from the external auditors, particularly the Service Manager-Investments.  

He provided an overview of his report and highlighted that materiality for the financial statements had been set at £26.1 million; he also pointed out the effectiveness of management controls over journals, which are automatically tested if high-risk characteristics or events were evidenced.  He noted that the last valuation reports available were dated 31 December 2020, while the audit takes place some months later in July/August; therefore, officers had to take into account later information from 31 March 2021.  As a consequence, with regard to key judgements and estimates, the Council was exercising caution by using the 31December 2020 data, and all other valuations of Level 1 and Level 2 investments were appropriate.  A letter of representation had been included within the report, but this would be signed later when the opinion on the main financial accounts was provided.  He noted that Grant Thornton, as the Council’s external auditors, also audited the Brunel Pension Partnership, and he referred Members to Appendices A, B, C, and D attached to his report for information on audit adjustments, fees, audit opinion, and management letter of representation.

The Vice Chair invited questions from the Committee, and during consideration of the reports, issues/concerns were raised, questions were asked/answered, and further information was provided:

Cllr Leyshon asked if the audit of the pension fund covers all pooled funds or just those with Brunel; the Key Audit Partner responded that the proportion of investments moved to the pool with Brunel had increased over the year and had been covered by the audit, as were those investments not yet transferred.  The Service Manager-Investments added that, as of 1 March 2021, 77 percent of assets had been transferred the pool, while currently the figure was approximately 93 percent.

Cllr Leyshon advised that she understood that all of the five Councils in Somerset had under-funded pension schemes, and she asked how all of the Councils’ funds would be combined in the future.  The Service Manager-Investment responded that each of the five Somerset councils had a deficit in their pension funds, which will be disclosed by two different methods/ calculations.  One of those would be found in their respective accounts each year, and overall (including 160 employers) the deficit stood at £2.3 billion as of 31 March 2019, which worked out to about 60 percent funded on an accounting basis.  Using the second type of calculation, which dictated the level of contributions (required under the LGPS once every three years), as of 31 March 2019, it was approximately 86 percent funded.  The next assessment would be made by the Fund’s Actuary at the end of March 2022, and the results should be available in October next year for each of the Councils.  As far as the deficit numbers, they vary across the country, and Somerset’s were not unusual; most local government schemes in England and Wales are in the 80 to low-90 percent range. 

Cllr Leyshon enquired if there was a risk to the investments within the Pension Fund from outside; the Service Manager-Investments replied that the funds were secure under current regulations and could not, for example, be reappropriated by the Government, and all Somerset funds would be re-valued under the unitary.

Cllr Noel asked for confirmation that contributions were still exceeding payments; the Service Manager-Investments responded that during the current financial year there were £122.9 million in contributions and £115.0 million in payments, resulting in an excess of approximately £8.5 million.

Cllr Chilcott asked, with regard to Brunel and the £40,000 charged for their audit, whether the Council indirectly pays part of that via a service charge, if more funds were transferred to Brunel, would that decrease the amount of work done in the audit and the cost of the audit, since more funds would be held by Brunel.  The Key Audit Partner replied that part of the audit of Brunel Partnership would be paid by service users, with the Council’s contribution being approximately £4,000.  As for the future, he advised that the audit work at the Council would not decrease and would remain the same for external auditors, even if all of the Council’s pension funds were with Brunel.

The Committee accepted the report.