Agenda item

To receive a report by Julie Masci, The Engagement Leader, Grant Thornton.

The Engagement Leader Grant Thornton, Julie Masci introduced the report. There was a similar picture in terms of the audit which was substantially complete. There were some areas outstanding highlighted in the report when the papers went out but those had progressed further since the paper had been issued. In terms of findings, Grant Thornton had not identified any adjustments impacting the results of the fund. One of the items, in the unadjusted items that was reported in the appendix of the report, reflected timing differences and were not considered as errors of management. Council officers must put together a set of accounts very early for the year end date and particularly in the context of a Pension Fund, which determined a value of investments and was dependent on third party information provided by the Pension Fund investment managers and other parties that helped inform the valuation and went into the accounts. By the time the accounts were put together the year information was not all available, so officers put together a best estimate which may be based on a quarter end position. There were a number of disclosure updates asked to be made to the Pension Fund accounts.   

Grant Thornton Audit Manager for Pension Fund, Chrissa Viente gave an update on the latest position on the audit of the fund.

• Page 7 of AFR/Page 169 of report pack – completed the review of the basis of valuation of Level 2 and 3 investments. A classification change from Level 2 to Level 3 amounting to £31.03m was identified and this is reported under disclosure changes on page 36 of our report/198 of report pack (item 2 – Note 17). This was marked in the report as TBC but we have confirmed that this is now updated.
• Page 7 of AFR/Page 169 of report pack – Grant Thornton have also completed our benefits payable testing subject to final quality review. No issues identified.
• Page 36 of our report/198 of report pack – Note 17 (2^nd item – cash and cash equivalents omitted from disclosure) and Note 18 (Classification of financial instruments) also resulted in material amendments in comparative figures (i.e 23/24 figures) and therefore would require prior period restatement. This is contained within this note disclosure. A proposed prior period adjustment is prepared by management which will be reviewed by our financial reporting colleagues. An update in relation to this will be reflected in the final AFR.
• Management was currently in the process of updating Note 5 ‘Assumptions made about the future and other major sources of uncertainty’ as details of some material investment values have been omitted from the estimation uncertainty disclosure. An update disclosure amendment will be reflected in the final AFR.
• An additional misclassification error in the Net Asset Statement amounting to £5.2m would be reported as an unadjusted misstatement. This was in relation to the distinction between the cash used in day-to-day operations and cash investments held with fund managers, to be separately disclosed as part of investment assets. The Code requires the cash used in day-to-day operations to be reported under current assets. The Pension Fund financial statements currently disclosed this under investment assets. The amount of error was immaterial and therefore was not adjusted by management. This has been noted and will be considered in future periods.
• Other disclosure changes and unadjusted errors falling above our triviality threshold would be reported in the final AFR and issue upon completion of Grant Thornton work and will be taken in the next Audit & Governance Committee meeting.

Cllr Suttle raised that in part of the action plan a problem that people could journal £50,000 and below without any permission which was related to SAP and highlighted as an audit action. He explained that this was no different than the issues the Council had, where people could move funds around without permission. He asked if SAP still allowed this to happen and if it could be changed?

Sean Cremer responded that it was flagged in the paper that the functionality within SAP did not allow this to happen. He recognised as the Committee had identified before the thresholds needed to be reviewed and he would take away as an action and look at an off-system approval process.

Julie Masci added that around the authorisation issue, Dorset was not on its own and was a common finding in local authorities. The threshold in which approvals happened did vary quite a bit from authority to authority. The best resort was to ensure that processes were built in within the financial system that did this automatically but with some form of compensating control to do that review on a manual basis.

Noted.