To consider the above titled item.

A member of the public had requested to speak on the item. Mr Hill said that 2018/19 final audit had missed the statutory deadline for publication by around ten months, and asked:

·         Why it was not published when received last December?

·         Why it was not returned to this panel as agreed would happen in November’s meeting?

·         Why it had not been sent to/returned by any of the mandatory consultees?

He expressed a number of concerns about issues identified in the 2018/19 final audits, including:

·         £1m of unreconciled bank accounts

·         £40.3m misstatement due to the use of out-of-date mortality tables

·         £34.2m misstatement in respect of an American convertible bond

Mr Hill asked the committee if it was satisfied with the robustness of verbal declarations of interest when significant investments were at stake. He asked Deloitte whether they considered the facts they had uncovered constituted materially significant poor advice or governance, and if so had they reported it to the Pensions regulator?

Jonathan Gooding, Deloitte, explained that the audit set out the scope of their work. The audit considered risk assessment and whether RBWM had the appropriate measures in place to control issues or risks. There were significant weaknesses that had been identified in the Pension Fund, but recommendations had been made and a review had been commissioned.

Aron Kleiman, Deloitte, further explained the External Audit Plan 2019/20. The first significant property risk was set out on p.12 of the Plan, with one fifth of the property portfolio being revalued. Deloitte Real Estate specifically looked at the valuations, methodology and arrive at a conclusion on their findings. There were some significant risks in the audit plan, but management and officers at RBWM had taken on board some of the findings and was doing things to mitigate these risks. The national deadline for the accounts to be published had been extended from July to the end of November 2020, but there was confidence that the majority of the accounts would be delivered in June and July 2020.

The Chairman asked if the risks listed on p.3 of the plan were risk triggers and if officers were happy with new deadline.

Jonathan Gooding said that there was a presumption that management would override controls. There was a consistency across all local authorities and the audit identified any significant capital spend as a risk.

Adele Taylor, Director of Resources, said that they were trying to stick to the original deadline as there was other things later in the year that resources would need to be focussed on.

Cllr Werner asked if RBWM was more at risk financially than it had been in the past. He asked Cllr Hilton for assurance that RBWM was dealing with the worrying obstacles that had been detailed in appendix 4 of the Plan.

Jonathan Gooding said that the risk of misstatements was the focus in this report. Last year was the first year that Deloitte had been involved with the audit. There had been issues raised with officers and these issues would not recur. He said that there had been good engagement from RBWM.

Cllr Hilton said that there was a change of auditor for all councils. He said that there had been issues at the start in terms of the supply of data that RBWM was able to give to the auditors and how they inputted it into their system. The audit took a long time to complete but it was a learning process and Cllr Hilton believed that it had improved governance as a result.

Cllr Werner asked Cllr Hilton if he was confident that issues from last year had now been solved.

Cllr Hilton said that he could not guarantee that there were no issues, but said that problems of the past had been taken on board.

Cllr L Jones asked if there would be a progress report on the value for money issues and what has been done to address them. She also asked about the impact of Brexit on the audit.

Jonathan Gooding said that they had identified significant risks and followed up on areas which needed more focus. On Brexit, it would depend what arrangements are in place.

Cllr Price asked if the Panel had seen and signed off the final version of the 18/19 audit. The Chairman explained that the draft version had come to the Panel in November and delegated authority was agreed to sign off the audit, provided there were no materially significant changes. He said that this would be checked with officers.

David McConnell, Deloitte, set out the Pension Fund part of the Audit Plan. He said that Covid-19 has had a significant impact on how the audit would be conducted. On p.12, there had been some changes to the risk assessments, with two risk areas outlined. He said that the Panel would be updated if any area of the Pension Fund was regarded as a significant risk.

Cllr Werner asked what the scope of the review was.

David McConnell said that all pension funds are reviewed every three years, with the size of the fund and the impact it would have being important. RBWM was managing on behalf of other authorities as it was the host of the Berkshire Pension Fund.

Cllr Werner further asked if the deficit was forecast to get worse.

Adele Taylor said that pension funds were different investments and were less susceptible to interest rate rises in the way that shorter term investments may be. They also could not be sure of the impact that Covid-19 would have on the scheme at this stage as markets were volatile but this was an area that was kept under review.

Cllr L Jones asked if officers would be able to provide a briefing to Members before they considered the audit report in future.

Duncan Sharkey, Managing Director, agreed that it was good idea and something that could be looked into.

Cllr Sharpe if the auditors had a different perspective on the risks present in the Pension Fund.

David McConnell said that he was not able to comment on previous years as a comparison but they had identified the significant risks that were part of the current Pension Fund.

Cllr Price asked if the poor advice given was materially significant and whether a report had been made to the Pension regulator.

Jonathan Gooding said that Deloitte had not made a report to the Pension regulator but had made recommendations around the weaknesses of the Pension Fund and this would be followed up in this year’s audit.

Cllr Tisi asked how aggressive the core actuarial assumptions were. She was told that an answer could not be provided just yet, but the issue would be assessed once the audit was complete which would be by the end of the summer.