Agenda item

The Committee is asked to note the Annual Audit Letter; and the 2018/19 fee letters for the County Council and Pension Fund that have been received from the External Auditor EY.

18.1   The Committee considered the Annual Audit Letter from EY (copies appended to the signed minutes).

18.2   Mrs Thompson, (EY) introduced the letter and explained it was a summary of the results of the July report.  An unqualified opinion had been given on the financial statements.  Mrs Thompson thanked officers for the smooth audit and reported that the work had been completed by the new deadline.

18.3   The Committee made comments including those that follow.

•    Queried the work to on the valuation of land and buildings and asked what assets were not being revalued.  – Helen Thompson reported that work on this already being done.  Mr Mathers, EY, explained that they had asked officers to use actual valuation to calculate properties, rather than an annual valuation.  All assets would be valued within 5 years.

•    Sought clarity on the calculations done for asset valuations.  – Mr Mathers explained that schools’ depreciation was considered.  Highways assets also considered depreciated costs.  This area had been a considerable focus of the audit.

•    Queried the value for money considerations with regard to contracts.  It was noted that there was a Task and Finish group looking at the monitoring of contracts, but it was important to ensure that initial contract negotiations were appropriate.  – Ms Eberhart confirmed that action had been picked up and was being discussed by the Performance and Finance Select Committee’s Business Planning Group (BPG) later.  The Committee requested an update from the BPG on the outcome of the discussion.

•    Raised concerns on the risks for the pension scheme and if accuracy of member records should be listed as a risk.  – Ms Eberhart confirmed that the transition to Hampshire County Council for pension administration had been well discussed with EY.  Some of the processes would be improved after the transition was complete.  No underlining problems had been identified.

•    Queried the due diligence that had taken place for the pension transfer and sought clarity on the timescales involved.  – Mr Hunt confirmed that the due diligence had been a large part of work for the decision that had been taken.  Ms Eberhart reported that the transfer would take place on 4 March and that data reconciliation work was happening every month to identify issues ahead of the transfer.  Officers were confident of a robust transfer.  A communication plan to members would begin this month.

•    Queried the reported pension fund deficit of £704.1m.  – Ms Eberhart explained that this figure represented the IAS19 practice and that officers considered the actuarial valuation.  Mr Hunt confirmed that there were 3 different valuations; EY’s, the actuary’s and the government’s. Mrs Thompson commented that they could look into how this risk was presented in future reports.  Mr Mathers explained that current requirements required reporting to IAS19 requirements.

18.4  Mr Hunt and Dr Dennis expressed their thanks to Mrs Thompson and her team, and also to County Council officers for their hard work to achieve the new deadline.

18.5   Mrs Thompson, (EY) introduced the 2018-19 fee letters for the West Sussex County Council and the West Sussex Pension Fund.  Mrs Thompson reported that the fees were reduced due to an expectation on good working with local authorities.  Risks would be coming to the January meeting for discussion.

18.6   The Committee made comments including those that follow.

•        Raised concerns that the reduction in fees could lead to a reduction in time and quality that EY was able to give to the audit.  – Mrs Thompson explained that it was a challenge, but gave assurance that EY would not sign a contract if there was concern the audit could not be achieved.  Different ways of working could be utilised, such as allocating appropriate work off shore.  Mr Mathers explained that if additional work was required, the fee would increase.  EY staff held themselves to a high standard and would continue to work with the Committee to give assurance.  Mrs Thompson resolved to send a special report from Institute of Chartered Accountants in England and Wales (ICAEW) to the Committee which outlined the expectation gap.

•        Asked if there was a data risk in moving work off shore.  – Mrs Thompson confirmed that only public data could be sent off shore.  Reassurance was given that General Data Protection Regulations were complied with.

•        Queried how long EY were in station for West Sussex.  – Mrs Thompson reported that EY had been in station since 2012 and that Public Sector Audit Appointment regulations allowed a maximum of 20 years.

18.7   Resolved – That the Committee notes the Annual Audit Letter; and the West Sussex County Council and the West Sussex Pension Fund 2018-19 fee letters.