Agenda item

The Committee is asked to consider the 2021/22 West Sussex County Council Audit Progress Report and the 2021/22 West Sussex Pension Fund Audit Results Report from the External Auditor Ernst & Young (EY).

14.1     The committee considered the 2021/22 West Sussex County Council Audit Progress Report and the 2021/22 West Sussex Pension Fund Audit Results Reportfrom the External Auditor Ernst & Young (EY) (copies appended to the signed minutes).

14.2     Mrs Thompson (EY) introduced the report and explained that a progress report had been presented as EY were not in a position to give an audit results report for the County Council financial statements.

14.3     Mr Mathers (EY) explained that a national issue concerning the reporting of the carrying value of infrastructure asset values was the reason the audit was delayed and that CIPFA were looking into this.  The rest of the audit was progressing well, and it was expressed that County Council officers had provided good support to EY.  An adjustment had been made to the statements for pension liability valuations linked to the initial estimates given to the actuary for valuations, for which there were now known values.

14.4     The committee made comments including those that follow.

•       Sought clarity on the infrastructure asset value issue.  – Mr Mathers explained that major infrastructure assets were held on a named basis on the register; however for some assets annual capital costs were grouped by year of spend.  The Council is therefore unable to identify replaced components of assets that should be derecognised from the asset register. This has the potential to lead to material overstatement of the gross and net carrying value of assets and limits audit scope.

•       Highlighted that in July the audit seemed on track, and queried what lessons could be learned to avoid delays in future years.  – Mrs Thompson explained that in July it was hoped that a national solution for infrastructure assets would have been found.  It was proposed that CIPFA had two options to resolve the issue; amend the code, or recommend the issue of statutory overrides.  Delays on a solution were likely linked to parliament delays from the appointment of the new Prime Minister, and the pausing of parliament for the Queen’s mourning period.  Work on the audit was largely complete.  It was hoped that the infrastructure solution would be applicable for next year.  Mrs Thompson added that where councils were prepared for audit, such as West Sussex, they were prioritised by EY to achieve deadlines.

•       Queried what would happen if the statements were not ready for approval by the November committee meeting.  – Mrs Thompson confirmed that the deadline for publishing audited accounts was the end of November.  EY were monitoring the situation to see what solution would be given nationally.  Mr Kirkham, Interim Director of Finance and Support Services, proposed that the limitation of scope option could be applied to accounts if a solution was not found, but expressed that this was not ideal.

•       Asked if the work on Property, Plant and Equipment (PPE) was complete.  – Mrs Thompson confirmed that the EY Real Estate report was due soon to complete the work.

•       Sought an update on going concern.  – Mrs Thompson confirmed that this work was halted as it required completion of the other outstanding elements first.  It was anticipated that, once the work could begin, it would be completed quickly due to the good support from County Council officers.  Cllr Hunt confirmed that County Council officers had submitted the accounts on time and that all the delays were due to external factors.

•       Queried if the issues relating to the Teachers’ Pension were unique to the County Council; and asked why after a year it was still not possible to scale the problem.  – Mr Mathers explained the issue was specific to the Council but that officers were getting closer to understanding the full risk implications, although progress needed to be accelerated in line with the Council’s own plans.  Mrs Chuter, Financial Reporting Manager, confirmed that officers were on track to submit data to the Teachers Pension Scheme (TPS).  Officers knew the number of impacted individuals and had plans with the TPS to do monthly batch calculations on the data.  By the March 2023 deadline it was anticipated that it would be possible to estimate the impact but there would then be a dependency on each individual’s decision to know the actual liability.  The committee requested an update on progress at each meeting.  Cllr Hunt added that early indications suggested that it was unlikely to be a large impact.  Rachel Wood, Pension Fund Strategist, explained it was a unique exercise and there was no concept of the retrospective take up to the pension scheme.

14.5     Mrs Thompson introduced the West Sussex Pension Fund Audit Results Report and explained that the audit was almost complete, but the opinion could not be issued until the County Council statements were completed.

14.6     Mr Mathers confirmed that the statements were well prepared and that EY had been supported well by the officers.  There were no significant changes or issues to report.  Mr Mathers spoke through the specific risks that had been considered and confirmed there were no issues to report.  There were also no significant amendments or disclosure changes resulting from the audit to highlight.

14.7     The committee made comments including those that follow.

•       Asked if the Teacher’s Pension issue would impact the statements.  – Mr Mathers confirmed that it was a different pension scheme.

•       Queried why the national issue on infrastructure assets did not impact the pension fund statements.  - Mr Mathers confirmed that the pension fund held infrastructure assets as income generation investment assets; whereas the County Council held infrastructure assets as operational assets to deliver services and so were subject to different valuation and reporting arrangements.

•       Asked why an EY property expert had only been used for County Council property holdings.  – Mr Mathers explained that the County Council property assets were varied and harder to value; whereas the pension fund assets were more homogenous and had been previously considered by an external specialist, who had been happy with the valuations.

•       Questioned why the report was listed as draft if the work was completed.  – Mrs Thompson confirmed that the report was listed as draft until it could be issued with the County Council report.

•       Queried the increase in audit fee from 2020/21 to 2021/22.  - Mrs Thompson confirmed that EY had asked Public Sector Audit Appointments (PSAA) for an increase following the Redmond Report which considered that audit fees were too low.  EY were waiting on PSAA to set the fee figure.

•       Sought clarity over the IAS 19 fee from EY.  – Mrs Thompson confirmed that this fee has increased by £500 for 2021/22.

•       Queried the actuarial valuation report date within appendix d.  - Mrs Thompson confirmed that 31 March 2020 was the date of the last triennial valuation.

14.8     Resolved – That the committee notes the 2021/22 West Sussex County Council Audit Progress Report and the 2021/22 West Sussex Pension Fund Audit Results Report.