Agenda item

FSD 19062

The report reviewed the External Auditor’s Pension Fund Plan arrangements for 2018-19 and also reviewed the Audit Fee Letter for 2019/20. Members noted the significant risks set out in the plan.

It was explained that the indicative fee was based on certain assumptions which were detailed in the Audit Fee Letter. Fees would be reviewed and updated as necessary, within the parameters of the contract. The indicative fee for the main accounts was £91,689 and for the Pension Fund was £16,170. Hannah Lill, (Ernst & Young),  attended the Committee to present the report and the fee proposal. The Committee was pleased to note that the scale of audit fees remained the same as the previous year.

A Member  expressed concern that the report on the External Audit Pension Fund Plan had not been brought to his attention previously in his role as Chairman of the Pensions and Investment Sub-Committee.  He said that new rules were being brought in which would increase audit requirements and that in the future there could be additional issues concerning ‘Admitted Bodies’. These issues could potentially increase the cost of managing the Pension Fund. He asked if there was going to be an audit on governance with respect of the Pension Fund. Ms Lill responded in the affirmative but explained that the pension audit would not be undertaken in isolation. 

A Member asked about the audit of the LCIV (London Collective Investment Vehicle).  It was explained that an audit of the LCIV would take place, but this would be a separate audit. 

Ernst and Young (E&Y) had identified a possible risk in that the valuation of investments could sometimes be mis-stated. In some of these cases, E&Y had stated in their report that there may be occasions when they would require input from their own valuation specialists. A Member asked why this was necessary as LBB had their own Actuary. Ms Lill responded that generally speaking this would not be necessary—it would just be in the odd case when there may not be sufficient evidence provided, or where additional expertise was required.

In response to a question, Ms Lill explained the difference between ‘Performance Materiality’ and ‘Planning Materiality’. A Member referred to page 13 of the report from E&Y where it referred to ‘substantive tests of detail of transactions and amounts’. He asked what was the definition of ‘substantive’ in this context. Ms Lill answered that there were two different types of approaches that could be followed in the audit—a substantive approach and a ‘control’ approach. The ‘control’ approach would be more detailed, would require specialist IT input and would therefore be more expensive. 

The Planning Report set out the following financial parameters:

·  Planning Materiality--£9.67M

·  Performance Materiality--£7.2M

·  Audit Differences--£483,500

Members noted how Ernst and Young would respond to Significant Risks, and what the various areas of focus would be. Members were appraised on the timescale relating to communication and deliverables.

RESOLVED that:

1) The External Auditor’s arrangements for the Bromley Pension Fund Planning Report for 2018-19 be noted.

2) Members note the materiality limits within the plan and confirm their understanding of, and agreement to, the materiality and reporting levels as outlined in the report.

3) Members note and agree the risks identified in the 2018/19 Audit Strategy.

3) Members note the contents of the Audit Fee Letter for 2019/20.