Agenda item
London Borough of Tower Hamlets Pension Fund Status Report to the Audit Committee on the 2019/20 audit
Minutes:
The Chair proposed and the Committee AGREED to take all four reports from Deloitte’s together.
The Chair invited Mr Jonathan Gooding, from Deloitte’s to address the Committee.
Mr Gooding provided a summary of the findings and said the difficulties experienced with the Statement of Accounts for 2018/19 and 2019/20 had been documented in previous meetings and therefore he did not intend to revisit this. Referring to the 2018/19 accounts, Mr Gooding said good progress had been made to address the issues raised. He said there was still some work outstanding however the key findings summarised the significant risks and the approach taken to address this. He said the opinion was likely to be a qualified opinion, as the authority should have prepared group accounts because the subsidiary entities were material. Mr Gooding stated the accounting of the pension fund liability, where employees transfer to one of the subsidiary entities was also a concern and said the accounting treatment applied as per the 2019/20 accounts was incorrect. Mr Gooding said he was continuing to discuss and consult on this aspect of the opinion and had not reached a conclusion on this. He said the other reasons identified related to insufficient evidence provided to support disclosures of expenditure in the accounts and disclosure of Officer renumerations.
In reference to the use of resources, page 51, Mr Gooding drew attention to the conclusions and explained why a qualified conclusion had been given in respect to value for money. Mr Gooding said the prior year adjustments were set out on page 37 and the current year adjustments, in appendix A. He said the control deficiencies were significant for this year and therefore this was reflected in recommendations made.
Referring to 2019/20, Mr Gooding stated the audit was very similar with a qualified opinion given. He said the qualifications were different because they had been able to satisfy themselves in respect to the disclosure of expenditure for that year.
Referring to the Pension Fund reports, Mr Gooding stated these were shorter reports as the number of issues identified were less. He said these set out the materiality applied and the significant risks which related to management override of controls and the procedures performed to identify this risk. He said an area of focus was the completeness of valuation and presentation of investments and the immaterial uncorrected misstatements where control recommendations had been made.
In response to questions and comments from members the following was noted:
- Councillor Whitehead stated this had been a long journey for both the Council and the external Auditors. She was pleased that both set of accounts were nearing completion and had been presented to the Committee.
- Councillor Whitehead said whilst it was disappointing to have qualified opinions, the hard work of Officers and the Auditors was a testimony to the efforts it had taken to resolve the issues identified. Councillor Whitehead stated she had met with Deloitte’s in a private meeting and that they had not raised further concerns other than what had been documented in their reports.
- Councillor Edgar echoed the comments made by the Chair. He referred to the recommendation made for members to receive detailed accounting papers and asked if this was common practice in other authorities. He said he was sceptical about how this would work.
- In response Mr Gooding stated the proposal was not suggesting members receive detailed papers but they receive papers which support the key judgements made. He said it was important for Members to understand how judgements had been reached and this would be good practice particularly for the Committee’s governance role.
- Mr Kevin Bartle, Interim Corporate Director of Resources and Section 151 officer said his view on this differed to that of Mr Gooding. He said due to the complexity of the accounts, providing detailed working papers to the Committee would slow down business. He said he appreciated his view is subjective, but he did not think providing accounting papers to the Committee would be helpful. Mr Nisar Visram, Director for Finance, Procurement and Audit, added that members were provided with training on the accounts as part of the Committee’s rolling training programme, which prepared members to analyse and question the accounts.
- ACTION: The Audit Committee to decide in the new municipal year 2022/23 if working papers and/or a summary of the key critical judgments in relation to the accounts, should be made available to members.
- In response to how the position of London Borough of Tower Hamlets compared with other authorities, who were in a similar position, Mr Gooding stated that due to the level of prior and current adjustments that were made to the accounts and the qualified opinion for value for money, plus the number of significant errors, the authority was one of the lower performing authorities for those specific years. He said the extent of qualification and adjustments were not common in the sector. Mr Gooding said notwithstanding this, the authority had invested heavily in resolving the issues and said the Senior Leadership Team and officers had shown great interest by working hard to resolve the position. He said it was clear this was being taken seriously by everyone.
- In response to what might cause the Authority to slip back, Mr Gooding said the big risk was the loss of retained knowledge as staff move or leave the authority. He said it was important for the Authority to ensure the recommendations and learning from the past years was embedded for future years, when producing the statement of accounts.
- In response to officer renumeration and employees working for subsidiary entities, Mr Angus Fish stated this related to schools using different payroll systems to that used by the Council. He said the issue had been reconciling the individual systems to that of the Council. He said the discrepancies were not material to the accounts, but they were sizeable numbers which made it difficult to tell if the list was complete.
- In respect to the Pension Fund audits, Councillor Whitehead said she would make the Chair of the Pensions Committee and the vice-chair aware of the additional items that need to be referred to the Pensions regulator.
The Audit Committee RESOLVED to:
- Note the comments of the Committee and the recommendations made in the four reports discussed.
Supporting documents: