Agenda item

The Committee had before it a report by the External Auditor on the 2020/2021 Annual Audit of the North East Scotland Pension Fund.  The report noted that auditors were required to report on specific matters arising from the audit of the financial statements to those charged with governance of a body, prior to the financial statements being approved and certified. 

In the opinion of External Audit, the North East Scotland Pension Fund’s financial statements gave a true and fair view in accordance with applicable law and the 2020/21 Code of the financial transactions of the funds during the year ended 31 March 2021 and of the amount of disposition at that date of their assets and liabilities; had been properly prepared in accordance with IFRSs as adopted by the European Union, as interpreted and adapted by the 2020/21 Code; and had been prepared in accordance with the requirements of the Local Government (Scotland) Act 1973, The Local Authority Accounts (Scotland) Regulations 2014, and the Local Government in Scotland Act 2003.

The key messages of the audit were as follows:-

·       That the Fund had had a strong investment performance in 2020/21 and recovered from the significant impact of the Covid pandemic on investment values last year;

·       That it had appropriate and effective financial management arrangements.

·       That systems of internal control operated appropriately and effectively in 2020/21, with two areas for improvement: reconciliations and authorisation limits.

·       That standards of conduct and arrangements for prevention and detection of fraud and error were appropriate.

The audit further noted that the triennial funding valuation as at March 2020 assessed both funds as fully funded and that the investment strategy had been reviewed and updated accordingly.  The insurance buy-in contract for the Transport Fund reduced risk for the Fund and increased certainty around the funding of the liabilities insured.  It was further noted that the Fund had appropriate and effective financial planning arrangements in place.

In terms of governance, it was considered that the governance arrangements introduced in response to the pandemic were appropriate and operated effectively, and that the Pension Fund demonstrated a commitment to openness and transparency.  The Fund was actively considering environmental, social and corporate (ESG) governance matters.

The audit had noted that there were effective arrangements for complying with the Pensions Regulator Public Service Code but that Member attendance at pensions training was however not meeting the minimum expected level.

The audit advised that the pension administration function’s performance against targets had been affected by added pressures from the Covid-19 pandemic, but that performance in priority areas remained high.  It was further noted that Fund investment performance in 2020/21 had exceeded all agreed

benchmarks as markets recovered from the significantly reduced annual returns last year, and the Fund had effective arrangements in place for monitoring investment performance and scrutinising investment management.

The Committee heard in detail from Ms Woolman in respect of the report.

Members asked a number of questions of Ms Woolman and officers in relation to the training attendance and any recommendation as to how to maintain attendance levels, the consideration of ESG issues in comparison to other areas; the risk register; and private equity level 3 valuations; and sought reassurance from officers that the two areas highlighted for improvement (reconciliations and authorisation limits) had now been addressed.

The Committee resolved:-

to thank staff and External Audit for their work to enable the audited accounts and annual report to be presented to the September meeting.

The Board resolved:-

to note the decision of the Committee.