Agenda item

This report updates the Audit & Standards Advisory Committee on changes made by The  Financial Reporting Council (FRC) in relation to its expectations for how local authorities are audited.

Paul Dossett (Grant Thornton – External Auditor) supported by Sin Yee Tang (Senior Finance Analyst) introduced the report which advised the Committee of a change introduced by the Financial Reporting Council (FRC) in the expectations for how local authorities were audited.

In considering the report the Committee noted:

·                The background to the changes introduced by the FRC, which had resulted in the Committee being asked to review the responses provided by the Council and Pension Fund to the Enquiries of Management as a means of informing the external audit risk assessment for Brent under the audit standards;

·                The importance of the report in contributing towards the effective two-way communication between the council’s external auditors and the London Borough of Brent’s Audit and Standards Committee, as 'those charged with governance';

·                Key areas on which the auditors were required to obtain an understanding of management process and oversight include the general enquiries of management, fraud, law and regulations, related parties and accounting estimates.

The following issues were raised in relation to the update provided and responses provided for review by the Committee:

·                Confirmation was provided in relation to the general enquiries of management provided on the Pension Fund that this was in a position to meet its liabilities based on the latest actuarial and investment assessment undertaken in 2019.  Clarification was also provided in relation to the level of employer contributions to the Pension Fund and impact in relation to the potential insourcing of Council services.

·                In response to a follow up query on fluctuations in the employer contribution rates on the Pension Fund, members were advised of the way in which these were designed to reflect the valuation undertaken by the Fund actuaries.  The deficit in terms of the Pension Fund liability presented in the draft statement of accounts was a different issue to the valuation, which had been based on the last review undertaken in 2019 and with the next scheduled for 2021/22.  Following the next review there would be a further assessment of employer contributions.  It was, however, common for Pension Fund liabilities to fluctuate on an annual basis between valuations.

·                Attention was drawn to the change in the health service organisational structure relating to North West London given the reference to Brent CCG and pooled social care costs within the response on significant transactions outside the normal course of business detailed as part of the general enquiries of management on the Council’s accounts.  Whilst noting the change in structure, Paul Dossett advised that the key focus would remain on the relationship and nature of the transaction identified between the individual Council and relevant health body.

·                As a final comment details were sought on the issue identified regarding non compliance on the VAT treatment of election costs referred to within the section from the general management enquiries on law and regulations.  In response members were advised that a detailed response would need to be provided on the issue outside of the meeting, although members were assured that the matter had been resolved with HMRC and a new process established to address the issue in relation to future VAT treatment.

As no further issues were raised members recognised the important role of the Audit & Standards Advisory Committee in terms of the assurance required on the response and it was RESOLVED, subject to the comments identified above to note and endorse:

(1)     the Brent Council Enquiries of Management as set out in Appendix 1 of the report; and

(2)     the Pension Fund Enquiries of Management as set out in Appendix 2 of the report.