Agenda item

(To receive a report by Claire Machej (Accounting, Investment and Governance Manager) which updates the Board on the changes to the Code of Practice on Local Authority Accounting, amendments to the Accounts and Audit Regulations 2015, the review of the Council's Accounting Policies for the Pension Fund and provides the External Auditors Audit Strategy memorandum report)

A report was submitted to the Board by the Accounting, Investment and Governance Manager on the Local Authority Accounting, Amendments to the Accounts and Audit Regulations 2015, review of the Council's Accounting Policies for the Pension Fund Statements and External Auditors Audit Strategy.  This also included a presentation from the Audit Manager from Mazars covering the External Auditors Audit Strategy Memorandum.

In response to questions, the following comments were made:

·       The reporting materiality threshold was in place to set a minimal level at which issues were reported to the Audit Committee. Mazars typically used a three per cent of headline materiality to determine the reporting threshold, in the case of the Lincolnshire Pension Fund this is anticipated to be £0.8m for the 2021/22 audit.

·       A sample size calculator was used based on risk, testing a number of benefit payments made throughout the year. Sample sizes used ranged from 30 to 50 for benefit payments. Likewise, a sample of pension contributions will be identified too.

·       As Lincolnshire County Council and Lincolnshire Pension Fund’s accounts were both in a combined document they were required to be signed off at the same time. Only at that stage, could Mazars prepare their audit opinion. It was suggested there may capacity to offer a separate audit opinion. As there are already two separate audit letters the impact on cost wasn’t expected to be substantial. Officers agreed to investigate the viability of two separate sign offs.

·       Whilst additional audit expectations had increased, the current scale fee had remained consistent for a number of years. Therefore, the fee variation existed to cover additional works. This was expected to increase for 2021/22. Within the current fee level, only limited testing could be undertaken.  Testing work could be done without the order of magnitude, provided a degree of reliance was put upon management, the custodian, and the fund managers. The current fee level was common among other pension funds throughout the country, all of whom were subject to similar variations subject to approval by PSAA (Public Sector Audit Appointment).

·       A fee is charge to those employers who’s auditor seeks an assurance letter from the pension fund auditor, the fee for each was approximately £1,400. The fee for assurance letters was at the discretion of Mazars while they had to observe PSAA fee parameters when setting scale fees.

·       The overall level of materiality that would affect the understanding of readers of the accounts was identified to be £29.3m, however testing was designed to test to a level of 75 per cent less, in this instance, £23.4m. This allowed for value miscalculation resilience in one or more areas. The headline materiality was clarified as being the overall figure that a reader of the accounts would likely be interested in. All errors over trivial materiality would be aggregated.

·       A range of different types of benefits would be considered within sampling providing sufficient coverage to ensure calculations in the automated systems to produce correct answers.

·       Mazars audited WYPF which offered an insight into the calculations and controls within the admin system and processes. Providing those systems were working correctly, a degree of reliance was put upon those systems to calculate values subject to no problems being identified. If there was an error identified on a value, it would be substantively tested. The senior auditor for Lincolnshire Pension Fund had extensive previous experience auditing pension calculations.

RESOLVED

1.       That the changes required to the Statement of Accounts from the Code of Practice 2021/22 be noted.

2.       That the changes to the Accounts and Audit Regulations 2015 be noted.

3.       That the Statement of Accounting Policies (LGPS) Pension Fund accounts for the financial year ending 31 March 2022 be approved.

4.       That the External Auditors Audit Strategy Memorandum be noted.