Agenda item

To receive an update on progress in delivering Grant Thornton’s responsibilities and consider the following papers from Grant Thornton as the Council’s external auditors:

8.1 London Borough of Brent Draft Audit Plan 22-23

8.2 London Borough of Brent Draft Pension Fund Audit Plan 22-23

(Agenda republished to include the above reports on 12 July 2023)

The Chair welcomed Ciaran McLaughlin, Key Audit Partner, Grant Thornton, who attended online to update the Committee on the External Audit Progress Report and Audit Plan that set out the scope of work being undertaken until the end of March 2023.

The following key points were highlighted as follows:

·                Recognition was given to the fact that despite the challenging economic environment the Council continued to perform well in delivering effective services and maintaining finances.

·                The 2022/23 audit was expected to be completed by October 2023; it was noted that Brent had fared well against other boroughs in the timely completion of their audits.

·                Key risks reviewed in the current audit were identified as standard in nature and not representing anything more significant.

·                The valuation of land and building, council dwellings and the final valuation of pension fund liability were identified as significant risk areas due to their complex nature, not as a result of anything specific to the Council’s management of these areas.

·                The Committee’s attention was drawn to page 15 of the report that addressed risk in relation to the Council’s subsidiary companies, this included setting out the progress made following previous recommendations, these would be commented on in further detail in the next Audit Findings report.

·                The Committee were informed that materiality was determined by using 1.5% of the Council’s gross expenditure as detailed on page 23 of the Committee report. There were no major changes in materiality to report.

·                The Value for Money aspect was assessed over three standard areas, Governance, Financial Sustainability and Improving Economy, Efficiency and Effectiveness as outlined in the report. There were no significant weaknesses identified at this point in the review.

The Chair thanked Ciaran McLaughlin for the update provided and for clearly highlighting the changes in the report. Given the timeframe of the estimated Audit completion and the Committee’s next meeting, the Chair recommended that the Committee may wish to seek an additional meeting date in October 2023 to allow the Audit & Standards Advisory Committee to consider and Audit & Standards Committee to formally approve the final Statement of Accounts, this was to be taken as a forward action.

The Chair then invited Sheena Phillips, Senior Manager, Grant Thornton to update the Committee on the Pension Fund Audit Plan.

The following key points were highlighted:

·                The Pension Fund had seen a small decrease of £13.5m in the net assets available for benefits during the 22/23 financial year, investment income had remined the same at £1.1m and the total contributions had increased to £67.5m.

·                The significant risks identified in the report were identified as standard to be included in local authority audits and included management override of controls, Valuation of Level 3 investment and the implementation of the new Pensions Administration System.

·                Level 3 investments invited particularly enhanced auditing due to the high values and estimations involved.

·                The Local Government Pension Scheme triennial valuation as required by Regulation 62 of the Local Government Pensions Scheme (LGPS) was identified as a lesser risk and was featured due to the varied assessments required as part of the valuation.

·                The progress against recommendations made following the 2021/22 Pensions Fund Audit would be fully addressed in the next Audit Findings report, due to be presented to the Committee at the next meeting.

·                In line with the main audit, the materiality of the Pension Fund was determined by 1.5% of the prior year’s gross asset value, with specific materiality being set aside for transactions within the fund other than those related to investment activities.

·                It was anticipated that the Pension Fund Audit would complete by the end of August 2023.

The Chair thanked Sheena Phillips for the report and invited the Committee to ask Ciaran and Sheena any questions or clarifying points they had in relation to the Audit Plan and Pension Fund Audit Plan. In response to Committee questions, the following responses were provided:

Responses in relation to the Audit Plan:

·                The Committee queried how the climate emergency could impact on Brent’s physical assets and how this may subsequently affect auditors’ valuations. In response the Committee was advised that when auditors examined the Council’s valuations, they were also subject to further review f by an expert team who factored in variances that may come in to play due to the impact of climate change, therefore auditors could be satisfied that by the end of the valuations process a breadth of eventualities had been considered and the valuations reached were as accurate as possible.

·                Following a Committee query in relation to whether the themes identified as risks in Brent Council’s audit were similar to other local authorities the Committee was advised that the risks identified were not unique to Brent and were standard in detail.  It was confirmed that there was nothing unusual about the significant risks identified in Brent Council’s audit.

·                The Committee shared that they were keen to maintain their position in the top 25% of Local Authorities who had their audits completed on time, as such the Committee queried if the external auditors could foresee any issues in the timely completion of the 2022/23 audit. The Committee was advised that communication between Brent officers and the auditors was positive, the effective collaborative working coupled with Grant Thornton’s increased capacity, provided assurance that there should be no significant delays to the completion of the audit and as such it was anticipated that the audit would be completed in the timeframe set out in the report for a completion date between the end of September – early October 2023.

·                The Committee was advised that points relating to recommendations made on the previous Audit Findings Reports would be addressed in full at the next Committee meeting.

(b)       Responses in relation to the Pension Fund Audit Plan:

·                Following a Committee query in relation to whether the Pension Fund Audit would be subject to an enhanced “hot review” that could delay its completion date, the Committee was advised that the Pension Fund would be subject to a hot review, however it was not expected to delay the conclusion of the audit and had been factored in to the anticipated completion date of August 2023.

·                The Committee queried why the change in the pensions administration system to Civica had been identified as a significant risk, as it was felt that this was a standard procedure for local authorities to undertake. In response the Committee was advised that the change in systems had been recognised as a significant risk due to the volume and sensitivity of the data being migrated, it was essential to accurately check that the data had been transitioned accurately and completely.  Ravinder Jassar, Deputy Director of Finance highlighted that the Pensions Sub Committee were aware of the change in administration platforms and although recognising the reasons identified, it was felt the migration had been completed successfully and presented a low risk.

·                Given the ambiguity around the accuracy of Level 3 Investments the Committee required clarity on the extent at which auditors would accept managers valuations of Level 3 investments. In response the Committee was advised that Level 3 investments would be subject to robust scrutiny and required evidence to support the valuations.

With no further issues raised and the confirmation that the Committee were happy to accept the risks identified, the Chair re-iterated his thanks on behalf of the Committee for the work of the external auditors and the Committee RESOLVED to note the updates provided.