Agenda and minutes

There were no declarations of interest.

RESOLVED – That the minutes of the meeting held on 24 September 2018 were confirmed and signed by the Chairman.

Report of the Director of Finance and Resources

The Interim Chief Internal Auditor explained that in 2013 the government had explored several options for improving the efficiency and sustainability of the LGPS and undertook extensive consultation on the potential to deliver savings through greater investment, management and collaboration.  The target date for implementation of 1 April 2018 had been achieved.

Four criteria were set by government: benefits of scale (at least £25bn in assets); strong governance and decisions making; reduced costs and excellent value for money and an improved capacity and capability to invest in infrastructure. 

On 23 March 2017 the County Council had approved the Council to enter into the Shareholders’ Agreement and the Inter-Authority Agreement to establish a joint asset pool (LGPS Central), and investment management company (LGPS Central Ltd) and Joint Committee.

Staffordshire had joined with Cheshire, Derbyshire, Leicestershire, Nottinghamshire, Shropshire, West Midlands and Worcestershire to form a partnership (or Joint Asset Pool) called LGPS Central and investment company (LGPS Central Ltd) and a Joint Committee. West Midlands Integrated Transport Authority (WMITA) are also a partner, but not a shareholder of the investment company.  The pensions pool had, when first established, a combined asset value of £35bn.  This value has slightly increased since this time. 

LGPS Central Ltd is an asset management company with an authorised contractual scheme.  Except for WMITA, all the local authorities are members of LGPS Central Ltd.  Four sub-funds had been established since April 2018 and other sub funds are to be launched after this date.  The benefits of LGPS Central Ltd are robust governance arrangements around the company and assurance by setting up an FCA regulated entity and retention of ownership/control and oversight of the company.  However, it was a costlier arrangement due to overheads and governance cost irrespective of the amounts invested.

The governance structure was described, specifically the separation of the shareholder/client and company/regulator functions and oversight arrangements.  Detail was given in page 21 of the report.

The responsibilities of the Pool are to monitor the company and this aspect is included in the assurance framework.  Staffordshire County Council’s Internal Audit Service have taken the lead on the development of a pensions pooling assurance framework although this exercise has involved all partner funds’ Internal Audit teams in getting to a draft document. 

In creating LGPS Central there had been a split in roles and responsibilities in terms of what the pension fund administrator retains and what went into the Pool.  LGPS Central being responsible for the structure and range of the funds offered, hiring and firing of the investment manager and the investment management company, LGPS Central Ltd, monitors the investment manager and their performance and ensured that the investment company satisfies all the regulatory requirements. 

The individual pension funds retained responsibility for the funding strategy, the investment strategy and all liabilities of the pension fund and the pool had responsibility for looking after the shareholder and investment areas and for pension fund performance monitoring.  Many of these areas are included within the assurance framework and will be  ...  view the full minutes text for item 47.

Report of the Director of Finance and Resources

The interim Chief Internal Auditor introduced a report and gave a presentation on the CIPFA Practical Guidance for Local Authorities and Police 2018.  This updated guidance that was issued in 2013.  The publication was long awaited as several publications and legislation had come into being during this intervening period.  A copy of the document would be shared with the Committee.

In introducing this item the interim Chief Internal Auditor reminded Members of the benefits of an Audit Committee: promoting good governance and its application to decision making; raising awareness of effective control environment; supporting effective risk management arrangements; advising on robustness of the assurance framework; reinforcing effectiveness of internal audit and external audit; aiding achievement of objectives via effective assurance arrangements; supporting the development of robust value for money arrangements; helping implement ethical governance values, and countering fraud and corruption and promoting transparency, accountability and effective public reporting.  The interim Chief Internal Auditor also reiterated that the Audit Committee was a key component of the authority’s government arrangements.

The position statement set out the main scope of the Audit Committee and then other chapters of the guidance detailed the core and wider functions and a self- assessment checklist that had been completed by the Internal Audit team in March 2018.  The key changes were highlighted and referenced against the pages in the guidance document.  The Interim Chief Internal Auditor then went on to explain what the key changes were.

The Audit Committee should be independent of Executive and Scrutiny functions.  The Guidance went a step further and the latest publication states that the Committee should also include an independent member. 

Secondly, there is reference to audit committees considering the robustness of risk management and consider not only partnerships but also collaborations.  As the Guidance also included the Police, this reference referred to the emergency services.  The Chairman stated that this also included commercial collaborations.

The Guidance went on to suggest that in monitoring the effectiveness of the control environment, supporting standards and ethics should be included.

In regard to the purpose of Audit Committees, previously Audit Committees were seen to add value in relation to developing an effectiveness of the control environment. Now, in addition, there was a need to raise awareness of the need for sound internal controls within the organisation.

In relation to supporting the quality of the internal audit controls, the Guidance suggested reinforcement of the objectivity, importance and independence of internal and external audit functions.

In terms of the core functions of the audit committee, the high-level core functions remained unchanged.  However, there were some changes within the detail.  The detail had been updated to include the new deadlines for the review of the AGS and financial statements and with reference to internal audit, reference was made to the PSIAS (Public Sector Internal Audit Standards) including the mission of internal audit, the Code of Ethics, definition of internal audit and the core principles of an effective internal audit team.

In terms of the Audit Committee’s role  ...  view the full minutes text for item 48.

Members requested that they receive an update on the Audit and Standards Committee Terms of Reference at their December meeting.

Members requested that they receive an update on progress against the outstanding actions in the Data Sharing Agreements – Final Audit Report 2018/19 at their January 2019 meeting.

RESOLVED - That the Forward Plan be amended to include a) revised Audit and Standards Committee Terms of Reference in December 2018 and b) an update on the outstanding actions in the Data Sharing Agreements – Final Audit Report 2018/19 in January 2019 c) A self-assessment of Fighting Fraud Locally will be brought to the December meeting.

RESOLVED: That the public be excluded from the meeting for the following items of business which involve the likely disclosure of exempt information as defined in the paragraphs of Part 1 of Schedule 12A (as amended) of the Local Government Act 1972 as indicated below.

(Exemption paragraph 3)

(Exemption paragraph 3)

(Exemption paragraph 3)

Report of the Director of Finance and Resources

(Exemption paragraph 3)