Agenda item

Report of the Chamberlain.

The Committee considered a report of The Chamberlain concerning an update on the production of the 2024-25 Statement of Accounts and planning for the 2024-25 audit of the City Fund, Pension Fund, and City’s Estate accounts.

A representative from Grant Thornton presented the City Fund audit plan, identifying key risks such as management override of controls, valuation of London Buildings Council dwellings, investment properties, and pension fund liabilities. The representative noted the inclusion of IFRS 16 as a new area of focus and discussed changes in materiality thresholds and audit fees. They also mentioned ongoing work on the Value for Money assessment and confirmed that no new significant weaknesses had been identified at this stage.

Crow’s representative, addressed the complexities of the City Estates accounts, including multiple income streams and new VAT considerations on school fees. They also flagged the need to assess market-related liabilities. The audit partner for natural spaces and sundry trusts, elaborated on the audit approach for these entities, emphasising the importance of income completeness and upcoming changes to accounting standards, particularly around revenue recognition and leases.

A separate update was provided by Grant Thornton on the Pension Fund audit. The key focus was the valuation of Level 3 investments, which are based on unobservable inputs and valued at £221.8 million in the prior year. Materiality was set at £29 million, with a lower threshold for the fund account. The audit is scheduled to begin in July, with completion targeted for the September committee meeting. Audit fees have increased to £95,000, reflecting market conditions and PSAA benchmarks.

A Member raised questions regarding the materiality change, the scale of audit fee increases, and the £20,000 threshold for exit package disclosures. Grant Thornton clarified that the materiality adjustment was minor (from 1.9% to 2%) and that all errors in exit packages, regardless of size, would be adjusted. It was confirmed that audit fees had been benchmarked against similar-sized London boroughs and explained that the City’s classification as a major audit under the PSAA framework contributed to the cost.

Grant Thornton also disclosed their office relocation from Finsbury Square to Finsbury Circus, noting that this would not affect their independence despite now paying business rates to the City. They also confirmed that their role as auditors for the London CIV, which pools the City’s pension fund, does not present a conflict of interest.

A minor update was also shared regarding IFRS 9. The Government has extended the override for investments held as of 1 April 2024 to 2029. New investments after that date will not benefit from the override.

RESOLVED – That Members,

a)     Note the Indicative City Fund Audit Plan for 2024-25 as set out in Appendix 1

b)     Note the Indicative Pension Fund Audit Plan for 2024-25 as set out in Appendix 2

c)      Approve the responses from Management for both the City Fund and Pension Fund as per Appendix 3 and Appendix 4

d)     Note the Indicative City’s Estate Audit Plan for 2024-25 as set out in Appendix 5