Agenda item

The Committee is asked to consider the 2019/20 Audit Planning Updates for the West Sussex County Council and the West Sussex Pension Fund from the External Auditor EY.

3.1        The Committee considered the 2019/20 Audit Planning Updates for the West Sussex County Council and the West Sussex Pension Fund from the External Auditor EY (copies appended to the signed minutes).

3.2        Mr Mathers (EY) introduced the West Sussex County Council Audit Planning Report Update which outlined how risk assessments had been updated to reflect Covid-19 and the associated market volatility.  The County Council was required to disclose how assurances had been gained, and demonstrate the areas of uncertainty.  An audit was required on the cashflow forecast that had been produced by the Council to support its going concern assessment, which would need to demonstrate all scenarios and liquidity.

3.3        The Committee made comments including those that follow.

•    Queried coverage of the going concern assessment of the report and how this would be evaluated up to November 2021 and if different budgetary scenarios be considered.  – Mr Mathers confirmed that the County Council had been asked to prepare a cashflow forecast considering all scenarios.  EY would consider if the assumptions made were reasonable and whether they were consistent with the assumptions made in the Medium Term Financial Plan.

•    Asked if performance materiality remained unchanged as a percentage or an absolute figure.  – Mr Mathers explained that performance materiality was calculated as a percentage.  EY had checked if the figure for County Council, 75%, was still valid due to Covid-19.  EY felt the figure was valid and should be maintained.

•    Queried when the audit report would be signed.  – Mr Mathers confirmed that the current plan was for the audit to be reported to the November committee meeting.

•    Sought clarity over the timescales for the creation of the cashflow forecast.  – Mr Mathers confirmed that the cashflow was planned for consideration at the end of the week. The cash flow forecast would need to extend forward for a period of at least 12 months from the planned audit report date.

•    Queried the scope of the stress tests.  – Mr Mathers confirmed that this was new working due to Covid-19 and that the checks would see if the included elements were reasonable.  The approach being followed was similar across all authorities.

•    Queried if the audit work on Property, Plant and Equipment has started.  – Mr Mathers confirmed that the work had started and explained that the County Council held values for existing use and fair value.  Depreciation had been considered and was not impacted by Covid-19.  The real estate team at EY were looking into the risks for the selected asset sample.  The level of work was significantly higher than normal.

•    Sought clarity on the government support transaction stream.  – Mr Mathers explained that the County Council had received initial support which was being held in reserve.  The support would continue into the new financial year.  Detailed audit of the support would not be included specifically in the current year’s audit, but could form part of income and expenditure testing if selected.

•    Queried the testing for unpredictable circumstances.  – Mr Mathers acknowledged that there would always be a degree of uncertainty and that EY were looking to see if the assumptions made were reasonable.  The statement disclosures needed to include the assumptions and the evidence to support them.

•    Congratulated EY and the County Council’s finance team on their hard work.

3.4        Mr Mathers (EY) introduced the West Sussex Pension Fund Audit Planning Report Update which took a similar approach to assets as for the County Council’s accounts.  Materiality uncertainty caveats had been included in respect of directly owned property and certain other investments.  Accurate valuations were difficult to provide given the impact of Covid-19, which had been outlined the report.  The fund was in a good position with positive cashflow, with assets in a position to be easily liquified if necessary.  Volatility had been impacted and so materiality would be considered at the year end.  Going concern risks were lower on the pension fund than main council audit.

3.5        Mrs Thompson spoke on fees and explained that this would be quantified when additional work had been requested, such as the extra valuation work.  A consultation process was taking place within EY which would ensure a consistent approach.  Once the fee had been quantified it would be discussed with Ms Eberhart, Director of Finance and Support Services, and then a report would be brought to the committee.

3.6        Mr Mathers explained the impact that Covid-19 had had on EY’s work, such as practical difficulties in looking at the financial statements with County Council officers; and the impact of risk within the statements.  Whilst it had not been a normal year, Mr Mathers confirmed that EY had been able to work well with County Council officers.  The account work was hoped to be completed in August apart from work on property, plant and equipment valuation.

3.7        The Committee noted that the funding level had been at 112% at the beginning of the year and queried the approach for risk profiling and de-risking.  – Mr Mathers explained that this was a judgement for the fund and not for EY.  EY were only able to comment on the accuracy of the fund position.  Mrs Thompson, EY, explained EY’s independence and that decisions would be made by those charged with governance.  Mr Hunt, Cabinet Member for Finance and Chairman of the Pensions Committee, gave reassurance that the strategy was being considered by the committee along with the approach for risk.  The fund was still over 100% funded.

3.8        Resolved – That the Committee notes the update reports for the West Sussex County Council and the West Sussex Pension Fund.