Issue - meetings

The Committee had before it a report by External Audit which set out the North East Scotland Pension Fund Annual Audit Plan 2020/21.  The report highlighted key audit risks and the planned audit work in respect of these, and set out the 2020/21 reporting arrangements to the Committee.

The Committee heard from Ms Gillian Woolman, External Audit, on the main points from the report. 

It was noted that the Auditor General for Scotland, the Accounts Commission and Audit Scotland were responding to the risks to public services and finances from Covid-19 across the full range of audit work including annual audits and the programme of performance audits. Audit Scotland viewed 2020/21 as a transitional year, leading in future to audit timetables which were possible before Covid-19, and it was important to maintain a pragmatic and flexible approach which would enable change at short notice as new issues emerged, or if current risks changed in significance. Where this impacted on annual audits, it was noted that an addendum to the annual audit plan might be necessary.

The following risks were highlighted to be taken forward as part of the annual audit plan:-

·       Consideration of the risk of fraud, presumed to be a significant risk in any audit. This included consideration of the risk of management override of controls to change the position disclosed in the financial statements.

·       The degree of subjectivity in the measurement and classification of certain investments and in the actuarial valuation. The report noted that the North East Scotland Pension Fund investments included investments such as property, unquoted equity and pooled funds, where valuations involved the application of judgement in determining appropriate amounts. The actuarial valuation depended on a number of assumptions about the future. These included investment returns, contribution rates, commutation assumptions, pensioner mortality, discount rates and earning assumptions. The Transport Fund insurance buy-in contract would be subject to an annual actuarial valuation.  The report noted that this subjectivity entailed a risk of misstatement in the financial statements.

·       The insurance buy-in contract to cover the cost of paying pensioners within the Transport Fund. The report noted that this was a new arrangement and additional audit procedures would be carried out to ensure that it was accounted for correctly.

·       Scrutiny of the annual accounts and audit reports could be limited in comparison to other Pensions Committee reports and External Audit would encourage members to strengthen their scrutiny of the annual report and accounts as the Fund’s primary vehicle to demonstrate stewardship of public funds.

The Committee resolved:-

(i)       to thank Ms Woolman for her presentation of the report; and

(ii)       to note the annual audit plan.

The Board resolved:-

to note the decision of the Committee.