Agenda item

To receive:

·         London Borough of Enfield final set of Pension Fund accounts

·         Audit Closure report from BDO (External Auditors)

Matt Bowmer, Interim Director Finance & Commercial and Bola Tobun, Finance Manager, Pensions & Treasury introduced the first report.

NOTED:

1.    The Pension Fund account is now ready for approval, the changes made since the last meeting are in the region of £2 million.

2.    In the first draft that came to the Committee last July, the net assets were £1.167 billion, but due to the pandemic the value of the private assets decreased and it was necessary to contact global custodian to use the March 2021 prices, to ensure that the prices that are being reported are actual prices/ valuation as at the end of March. This showed a total reduction of some £17m from Fund net assets value. This correction has now been incorporated and the net asset value of the Fund in the statement of accounts being tabled at this meeting is £1.149 billion.

Questions, comments & queries:

·         The pensions committee has been told that the Pension Fund is fully funded and that there is a surplus with assets higher than liability. Given the assets have reduced in value due to pandemic, confirmation was requested that at the end of 2019/20 the Pension Fund is still fully funded. Officers confirmed that at the end of March it was not fully funded the Enfield PF was at 96%, but quarterly updates are provided by the actuary. By the end of June 2020, it was at 106% and by the end of September 2020 went back to 103% same as the funding level reported for the former triennial valuation as at March 2019. Now awaiting the outcome of the December 2020 quarterly update.

David Eagles & Satinder Jas from BDO (External Auditors) introduced the Auditors completion report

NOTED:

1.     The Audit Completion report is a required communication to the General Purposes Committee at the conclusion of the audit for the Pension Fund. The Pension Fund is regarded as a separate engagement to the main council accounts. There is a separate opinion given on the Pension Fund part of the accounts.

2.     Page 59 of the pdf agenda pack details Financial Statements overall Materiality. It was highlighted that the materiality set at the planning stage has not moved from £12 million.  There are two material statements in relation to Fair Value of Investments, which were re valued. The Council took a valuation in December and then estimations to year end. Due to the changes and impacts of Covid the Council did a revaluation resulting in a £20.7 million adjustment. This is reflected in the accounts.

3.     The second statement is a reduction in the valuation of Pension Fund liabilities of £305 million in relation to a challenge on the assumptions that were used. This affects the main accounts not the Pension Fund accounts.

4.     Page 65 of the pdf - Management override of controls, it was confirmed that no issues have been identified in this area.

5.     Page 66- Fair value of Investments, it was confirmed that no issues have been identified in this area.

6.     Page 64 details where the net Pension Liability adjustment (£305 million) and page 65 details what caused this.

7.     The adjustment of £20.7 million is referenced on page 67 (Fair Value of Investments- other). The work BDO completed identified the adjustment, which has been corrected and reflected in the accounts.

8.     Page 68 Related Party Transaction Disclosure, this was not a significant risk, it was a normal risk and there are no issues.

9.     Page 69 Membership Disclosure identified one small error which has been corrected.

10.  Page 87 Outstanding Matters lists all items outstanding at the point the report was completed. Significant progress has been made and the only areas outstanding are some disclosure notes and one other note. Once work has been completed on the notes it is not expected that there will be any changes to the core statement.

11.  There is a final technical review and a final review from David Eagles which needs to be completed. Then the final updated set of accounts will be able to present BDO’s opinion. This will be presented with the main accounts as cannot be presented as a separate opinion.

Comments, queries and questions:

·         Fair Value of investments it states that there is a significant risk that the investments are not appropriately valued in the financial statements (Page 62). In terms of the liabilities it states that there is a risk that the valuation uses inappropriate assumptions to value the liabilities (Page 63). As this says that there are risks about the accuracy of both the value of the assets and the liabilities. How significant are these risks? BDO advised these risks are planned risks, BDO consider prior to commencement of work, they consider where there are risks that the accounts could be misstated. Once risk assessment undertaken report to Committee where they expect to spend most of the resource of the audit. Then report back conclusions, in terms of the valuation of investments the position subject to amendments needed they is not a material exposure. In terms of actuaries estimate of liabilities, there was a risk relating to the assumptions being made. This was challenged and this found that they need to be revisited once this was done this changed the value of the liability by the £305 million previously referred to. This has been adjusted meaning the residual position is free of material misstatement.

·         Will there be a statement of adjustments when the opinion given? BDO confirmed that within appendices are details of adjustments put through. When work is completed if there are non-material or unadjusted items these will be reported. A complete list will be with the final set of accounts.

AGREED to approve the audited Pension Fund Statement of Accounts for 2019/20.