To note the report.

Damien Pantling introduced the report on Good Governance, firstly giving some background information that in September/October 2021, the CIPFA 2016 risk management framework was introduced to the Fund and adopted for Pension Board and Pension Fund Committee reports. The framework was used to establish the annual risk management policy and formed the basis for the quarterly Risk Register presented to the forum for approval. It was noted there had been a lack of professional second opinion on the interpretation of the framework.

Damien Pantling explained that an internal audit was commissioned a few months ago to thoroughly review the Fund's risk management practices. The outcome of the review was positive, with no high-priority recommendations identified. However, two classified as medium priority and five as low priority recommendations were made. Officers had already begun working on addressing the recommendations, and the deadlines were considered realistic.

Damien Pantling said it was important to note that internal audit reviews were not compulsory but were conducted for reasons of good governance and best practice. These reviews aligned with the Fund's business plan and its goals of continuous improvement.

Councillor Tisi highlighted the positive progress with no high-priority actions required, commenting that of the two medium-priority actions, one of which had already been resolved within the allocated timeframe. Regarding the open action concerning risk controls, Damien Pantling said specific risks identified had been addressed. However, restructuring the risk register remained pending. Damien Pantling highlighted that discussions with RBWM on utilising their risk management software were underway, with plans for a review before the next Pension Fund Committee meeting in March or June. He noted that the software seemed suitable for local authorities, its compliance with LGPS risk management frameworks would be assessed before implementation. If necessary, external procurement options would be explored.

Councillor Newton commended the initiative taken for the voluntary internal audit, noting positive outcomes with minimal priority actions identified, he then inquired about the plan for future audits and updates on pending actions.

Damien Pantling said that whilst there was no specific agenda item for reporting back on these actions, Officers intend to provide updates periodically. This could be included in future Good Governance reports, the annual governance statement, or the annual business plan. The exact reporting mechanism was yet to be decided but would ensure transparency and accountability.

Regarding future audit plans, Damien Pantling highlighted that the administering authority's Audit and Governance Committee sets the internal audit plan. The Pension Fund would coordinate with them to allocate internal audit resources effectively. While annual audits were not guaranteed, efforts would be made to continue this practice for ongoing improvement and oversight.

Councillor Da Costa commended the presentation and expressed agreement with the recommendations put forward. He emphasised the importance of having a formal view and external validation. Councillor Da Costa then inquired about the approach taken by external auditors in assessing the risk program, considering RBWM's existing teams. He sought clarification on how the audit compared to traditional audits, which focus on accounting standards and balance sheets. Councillor Da Costa then asked how and when the risk appetite framework would be reviewed and implemented, acknowledging its significance in framing the approach to risk management. Finally, Councillor Da Costa mentioned about exploring other systems suggested by the LGA's pension fund teams. He expressed the intention to consider additional systems for inclusion in the risk assessment process.

Damien Pantling noted that the audit was conducted by an external partner, which comprised a group of councils with extensive experience auditing local authority accounts and pension funds. Their review focused on best practices in risk management within the LGPS framework, drawing insights from partner Funds and other audits. As for risk appetite, Damien Pantling explained that with 46 risks in the register, setting individual appetites for each would be impractical and constantly evolving. He said they were considering grouping risks into the seven categories to establish a more pragmatic approach. Whilst they had already set appetites for funding and investment risks, defining appetites for the remaining risks was an ongoing process, with a deadline of approximately a year to finalise.

Councillor Tisi made a few points, firstly, regarding the assessment of risk appetite, and that it was sensible to consolidate opinions rather than evaluating each of the 46 risks individually. Secondly, while the recent internal audit reflected positively on the risk management practices, it was prudent to consider the cost-benefit analysis of conducting audits annually, suggesting a flexible approach, such as determining audit frequency based on value-added insights, rather than a fixed schedule.

AGREED: That then Pension Fund Committee notes the report;

i)     Considers the findings presented by SWAP Internal Audit; and

ii)    Approves the recommendations for implementation by the deadlines disclosed in the Internal Audit report (Appendix 1).