Agenda item

Consider the Annual Audit Reports from the External Auditor on various entities for review and scrutiny prior to Council approval.  (Copy attached).

(a)       Scottish Borders Council Pension Fund 2021-22 Annual Audit Report (copy attached);

(b)       Audit Scotland Scottish Borders Council annual report (Covering letters and report attached.)

3.1       There had been circulated copies of the Audit Scotland Scottish Borders Council Pension Fund 2021-22 Annual Audit Report.  Ms Woolman introduced Mr Asif Haseeb to present the report.  Mr Haseeb explained that report had been presented to the Pension Fund Joint Board/Committee and was before the Audit Committee for information.  Mr Haseeb emphasised that the Council was the administrative authority for the fund and stewarded a fund of over £900 million.  There were no significant audit findings; however there were four recommendations made which were detailed in Appendix 1 of the report and which were accepted by officers with an agreed action plan.  Appendix 1 of the report also set out the progress on recommendations for the previous year.  Mr Haseeb summarised the key messages of the report which were that:

·                The audit opinions on the annual report and accounts are unmodified;

·                The financial statements of Scottish Borders Council Pension Fund gave a true and fair view of the state of affairs of the Fund as at 31 March 2022 and have been properly prepared in accordance with the financial reporting framework;

·                the Fund paid out more than it collected annually from fund members, with investment returns making up the difference;

·                the value of the Fund increased by 5.9% to £911 million during 2021-22, but investment performance was below the benchmark return set for the year;

·                the Fund has appropriate and effective financial management arrangements in place which included comprehensive reporting of investment performance;

·                recent triennial valuations provided assurance over the financial sustainability of the fund and the viability of its funding strategy;

·                the Fund reviewed its investment strategy following the March 2020 triennial valuation and would continue to diversify the investment structure to support income generation,

·                governance arrangements had been appropriate and operated effectively;

·                there was effective scrutiny, challenge and informed decision-making by committee;

·                the Fund actively considered Environmental, Social and Governance matters as part of its Investment Strategy;

·                the Fund had an appropriate best value framework in place which included effective arrangements for monitoring investment performance and scrutinising management expenses;

·                Scottish Borders Council Pension Fund was awarded Local Government Pension Scheme (LGPS) Fund of the Year (assets under £2.5bn) at the LAPF Investments Awards; and,

·                2021-22 was a challenging year for Scottish Local Government Pension Schemes. Ten of the eleven funds in Scotland still reported positive movements in net assets during the year, but only three of those funds, not including Scottish Borders, reported above benchmark returns.

3.2       In response to questions from Members, Mr Haseeb confirmed Audit Scotland was satisfied the incidence of an error in calculation of pension benefits was an isolated one and that retesting was not necessary.  Discussions had taken place with management and Audit Scotland was satisfied with the response received.  Mr Robertson advised that advice was sought on the incident, including from the Strathclyde Pension Fund, and that an isolated error was made which management understood why it happened and steps were taken to learn lessons so the mistake would not happen again.  Mr Haseeb further advised that Audit Scotland that testing on transfers did not raise significant concerns and that future auditors may wish to look into this area.

DECISION

NOTED Scottish Borders Council Pension Fund Annual Report 2021-22 from the Council’s External Auditor.