Agenda item

This report presents the current Breaches of the Law log (in Appendix A) for the Pension Fund and highlights any changes made since the last review carried out at the Pension Committee meeting held on 11 June 2024.

The Head of Pensions and Treasury introduced the item and explained that

Officers had added the annual benefit statements as a breach because they did not do 100% in total. Officers had completed 100% active member cases, but the total overall was 96%, which is why it was recorded as a breach despite the figure being an improvement on the previous year.

The Head of Pensions and Treasury informed the Committee that two items had been removed from the list that they brought to Committee; however, they were not removed from the breaches log. The Head of Pensions and Treasury explained that officers stopped reporting breaches to Committee after three years or if they had been resolved. Officers have stopped reporting the breach relating to the fact that they missed the 100% on the annual benefit statements for 2021, and they also removed the item where they reported the Council's discretion policy which was now active.

The Head of Pensions and Treasury stated that the new government had proposed secondary legislation which required a backstop to be put in place by the 13th of December 2024.

The Head of Pensions and Treasury explained that they would have to have the accounts finalised for up to 2022/23 by the 13th of December. Officers

were aiming to produce and publish the 2021/22 and the 2022/23 accounts by the end of October. The Head of Pensions and Treasury stated that officers would then aim to produce the 2023/24 annual report and accounts by the 30th November.

The Head of Pensions and Treasury informed the Committee that they

were expecting auditors to sign off on the 2019/20 accounts with an opinion and for the 2020/21 to 2022/23 accounts, they expected the auditors to issue a disclaimed opinion. The Head of Pensions and Treasury stated that the auditors would then audit the 2023/24 accounts for the pension funds, and the backstop said that the date for publishing those accounts would be the 28th of February 2025; officers expected to receive at the modified audit opinion.

The Head of Pensions and Treasury explained that the reason why the auditors could not provide a clean audit opinion on the 2023/24 accounts was because they wouldn't have audited the previous year’s accounts.

The Head of Pensions and Treasury informed the Committee that they had moved the December Pension Committee meeting forward to the 3rd December because the auditor needed to give the accounts a disclaimed opinion. Officers would present the accounts up to 2022/23 to the Committee in December.

In response to questions from Members officers informed the Committee that:

• The risk of not having audited accounts was low to the pension fund, as the majority of the pension fund was really an asset statement.
• The auditors would audit the 2023/24 opening balance, the closing balance of the 2022/23 accounts, to enable them to audit the 2023/24 accounts property.
• Investment advisors tracked investments quarterly.
• Once the situation with the outstanding accounts had been managed, the reputation could begin to be rebuilt.
• At the Audit & Governance Committee in March, Grant Thornton reported they were happy with the accounts for 2019/20. The accounts then needed to go to the powers that be in order to be finally agreed and so that the final statements can be completed. Officers were still waiting for the accounts to come back from Grant Thornton, so without the backstop the accounts would never get out this cycle.
• The Council had offered pushback as they had a lot of reputational risk and having disclaimed accounts would not be helpful and it would be better for the accounts to be signed off properly. The Council was yet to receive a comment from the government in relation to this but given the way that the Ministers letter was worded in July it was clear that there would be no dispensations. However, despite the 13th of December deadline the legislation was not in place, so officers were still slightly unsure of what the legislation was going to say.
• When they started the audit of the 2020/21 accounts with Grant Thornton, it became apparent from the Council’s main accounts that their sample sizes had gone up and officers were being asked enormous numbers of questions which became unmanageable. This was because Grant Thornton felt that the Council had to have much bigger samples because they were such high risk which made the whole audit quite unmanageable.
• The Council were very fortunate to have Grant Thornton’s services because the other auditors were struggling even more than them.
• Tendering was done through Public Sector Audit Appointments (PSAA), the Council did not directly contract Grant Thornton it came through a panel.
• This was a sector wide issue for local government driven by an international issue for auditing firms.
• The proposed removal of £100 million from the Pension fund to purchase properties was not actioned and all of the Croydon Affordable Homes issues had been sorted out. The Kroll report was still with the metropolitan police and the Council had not received a formal response back from Metropolitan Police. This was the March report from Grant Thornton was a disclaimed report for the 2019/20 accounts because of the fact the Kroll report was still with the Metropolitan Police.
• Officers were hopeful that there would be progress made with the 2019/20 accounts and they would be signed off soon.
• The intention was to produce the accounts up to 2022/23 and have them published by the 31st October, this would give time for the public inspection and this was independent of what happens with the Council's accounts. The 2023/24 accounts would be published by the 30th November.
• The 2021/22 and the 2022/23 accounts would be brought to the December Pension Committee meeting.
• The annual benefits statement was not removed from the actual log, it had stopped being reported to Committee. After three years officers decided to remove any items that were still on there.

Resolved:

1.1   To review and note the contents of the Pension Fund Breaches of the Law Log.