Each LGPS fund must prepare financial statements following the LGPS regulations and CIPFA guidance. These statements are subject to an annual, statutory external audit. A fund must provide an overview of its financial performance, focused primarily on income, expenditure and cash flows. It should provide analysis and explanations of in-year expenses and income, with comparison over time or against a budget.

LGPS pension fund financial audits are the responsibility of three statutory auditing bodies – the Public Sector Audit Appointments Limited (PSAA) (the Audit Commission up to 31 March 2014), the National Audit Office for the 83 LGPS funds based in England and the Welsh Audit Office for the eight LGPS funds based in Wales. They are required to give assurance (or otherwise) that the financial statements show a true and fair view of the fund income and expenditure and the amount and disposition of the fund assets and liabilities.

From 1 April 2015, the responsibility for appointing Local Authority auditors passed to PSAA (a limited company being set up by the Local Government Association) and currently five firms of external auditors undertake these audits.

The LGPS Regulations require administering authorities to prepare and publish an annual report. This report must include a Fund Account and Net Assets Statement with supporting notes and disclosures, prepared following the CIPFA Code of Practice.

Some employers must include the impact of pensions on their revenue account and balance sheet. Financial reporting standard 102 (FRS102) and international accounting standard 19 (IAS19) are standards requiring certain employers who have employees in defined benefit pension schemes to include the impact of this on their financial statements. Therefore, this includes any employees they have in the LGPS. GMPF’s actuary prepares this accounting information for each employer that needs it.

Pension accounting reporting uses different calculation methodology and different actuarial assumptions to those used in formal valuation reporting, plus the frequency also differs. Accounting standards require the impact of pensions to be calculated each year using actuarial assumptions based on market conditions at the accounting date. Therefore, these accounting estimates vary from year to year and the assumptions that the actuary uses are different to those used when calculating liabilities as part of the actuarial valuation, which only takes place every three years.

The accounting valuation has no impact on the cash contributions payable. The annual accounting exercises are divorced from our own triennial actuarial valuation, which is where contribution rates are set.

The auditor decides on the assumptions used to prepare an organisation’s pension accounts, based on FRS102/IAS19 standards of reporting.

Fund accounts are prepared separately from the administering authority’s own accounts because the administering authority is not the only employer in the fund.

All employers must adopt assumptions that are ‘best estimate’ (in line with the accounting standard).

Data relating to early retirements will come from scheme employers in the first instance, however, it is the administering authority who will then provide that information to the actuary.

GMPF's Management team and Internal Audit team agree on a programme of audit work at the start of each financial year. Some of the work links to the activities that the Management team plan to undertake as part of that year’s business plan objectives. Others link to areas of risk that appear on GMPF's risk register. The Internal Audit team also provide the GMPF's Management team with regular advice on change and risk management.

The Director of Pensions and relevant officers with the delegated responsibility must ensure all procurement undertaken is in line with the rules and the authority’s procurement standing orders.

STAR Procurement is a shared procurement service for Rochdale, Stockport, Tameside and Trafford Councils. The service supports councils to arrange contracts for any supplies, services or work that they cannot provide in house. Its key aims are to promote best procurement practice, inform decision making and champion social value. STAR helps teams to understand their requirements, ensuring procurement practices comply with the law and contracts achieve the best value.

A procurement framework is an agreement with a provider or range of providers that enables buyers to place orders for services without running lengthy tendering exercises. Frameworks can bring together different buyers' needs, which means individual buyers can source services at lower prices, sometimes with special added benefits or more favourable conditions.

The main benefits of using a framework are:

• cost – using a framework is generally a lot cheaper than undertaking a full procurement yourself
• effort – a lot of the work has already been carried out to ensure that the suppliers meet the requirements
• time – it reduces the amount of time needed to get a supplier and contract in place.

The National LGPS Procurement Frameworks is a collaborative initiative by several LGPS funds. It has created several procurement frameworks specifically for LGPS funds to use. These Frameworks are compliant with procurement regulations and allow for shortened procurement timeframes. This means that when an LGPS fund needs to buy a service, they can simply call off the framework by running a mini competition, which normally takes four to six weeks.

Frameworks that are currently in place include those for:

• actuarial, benefits and governance consultancy services
• investment management consultancy services
• investment management performance and cost monitoring and reporting services
• legal services
• member data services
• passive investment management services
• pension administration software
• stewardship advisory services
• third party administration services
• transition management and implementation services.

The National LGPS Procurement Frameworks initiative provides funds with access to pre-agreed Terms and Conditions for funds and bidders. It ensures due diligence has already been carried out on all bidders in advance and provides forms and guides for carrying out tenders. However, it does not select a preferred provider on a fund’s behalf – this is down to the individual fund.

Prior to Brexit, public Authorities had to carry out an EU tender procedure when the total value of a relevant contract exceeded the EU thresholds.

These rules were transposed into UK law, and so the majority of details of what must be done remain the same. The main difference is that, instead of publishing notices in the Official Journal of the European Union, this is now done on the UK’s Find a Tender Service (FTS) website.

If the value of the contract exceeds thresholds set by regulation, an authority must advertise the tender on the FTS site.

Once an authority has decided that they need to procure a service or goods and has estimated the value of the contract, then they need to establish the exact requirements of what they want from the potential supplier, usually done in the form of a tender specification.

There are then five different options for carrying out tender exercise, which in brief are:

• Restricted procedure – a two stage process involving a pre-qualification questionnaire followed by a formal tender.
• Open procedure – a one stage process where anyone may submit a tender.
• Competitive procedure with negotiation.
• Competitive dialogue.
• Innovation partnership.

An open procedure is by far the most frequently used. Local authorities rarely use any of the last three options.

The next stage is to advertise the requirement and determine the time in which to receive tenders. Once the closing date has passed, the authority must evaluate the tenders in strict accordance with the criteria, marks and scoring mechanism stipulated in the tender documentation. When the authority has identified the winning bid, a mandatory standstill period must be observed between notification of the contract award and agreeing on the contract. This is to allow the unsuccessful tenderers to challenge the award decision before the contract is awarded. The authority must send a standstill letter to all tenderers (both successful and unsuccessful) on the same day notifying them of the outcome of the tender process.

Once the standstill period has expired, the authority can agree on a legal contract with the winning bidder. It must then place a Contract Award Notice on the FTS site within 48 calendar days of the award.

The MEAT (most economically advantageous tender) method of procurement evaluation uses the following criteria:

1. Quality of provider
2. Technical ability of provider
3. Cost effectiveness of bid

GMPF adds details of all contracts to its contracts register so they can be reviewed and updated regularly. We also ask key suppliers to present reports periodically to the appropriate Working Group or directly to the Pension Fund Management Panel, so their performance can be scrutinised and challenged. It is still GMPF’s responsibility to deliver services, even where it has outsourced them. Therefore, it must manage all contracts effectively.

Methods for keeping a third party provider under review include:

• Monitoring performance against pre-agreed Key Performance Indicators
• Formal annual service reviews
• Regular market testing

The Competition and Markets Authority (CMA) requires pension schemes to set objectives for investment consultants and regularly measure performance against those objectives.