The Pensions Audit Sub-Committee is scheduled to meet on 23 September 2025 to discuss governance, audit reports, and fraud prevention relating to the Lothian Pension Fund (LPF) and the Scottish Homes Pension Fund (SHPF). The meeting will cover a quarterly governance update, the audited annual report and accounts, an internal audit update, and a report on fraud prevention. Some items may be considered in private due to the disclosure of exempt information.

Items for Discussion

Audited Annual Report and Accounts

The sub-committee will be presented with the Audited Annual Report and Accounts for the Lothian Pension Fund and Scottish Homes Pension Fund. The report includes an ISA 260 annual report by Azets Audit Services, the external auditor, which is scheduled to be presented to the Committee by Chris Brown, Partner at Azets Audit Services. The ISA 260 report is expected to provide a view of:

• Significant qualitative aspects of the Funds' accounting practices
• Any significant difficulties encountered during the audit
• Any material weaknesses in internal controls
• Significant matters arising from the audit discussed with management
• Any representations requested from management
• Any other significant matter

The report is expected to confirm that Azets will give an unqualified opinion on the financial statements for both the Lothian Pension Fund and Scottish Homes Pension Fund. The report is also expected to confirm that LPF has effective arrangements for financial management, use of resources and ensuring ongoing financial sustainability. However, the report is expected to note that improvements could be made to vision, leadership and governance arrangements. In particular, the report is expected to refer to:

• Internal Audit's identification of a high priority recommendation regarding the effectiveness of working relationships within the Pensions Committee, and a number of medium priority recommendations.
• A recommendation that all Board and Pensions Committee members attend the minimum number of training hours required by the Funds' training policy.
• A review of conflicts of interest arrangements following the delay in signing the 2023/24 Annual Report and Accounts.

The report pack also includes the audited financial statements for the year ended 31 March 2025 for LPFE Limited and LPFI Limited. The report pack also includes a draft letter of representation under ISA 580¹ by the Service Director - Finance and Procurement.

Internal Audit Update

The sub-committee will receive an update on internal audit activity related to the Lothian Pension Fund. The update will include:

• Progress of the Internal Audit's assurance activity
• Delivery of the Internal Audit plan 2025/26
• Outcomes of work recently undertaken by the Internal Audit function as related to Lothian Pension Fund

The report pack includes the Investment Governance Improvement Plan Implementation Audit Report, and states that the completion of the Investment Governance Improvement Plan Implementation audit has been delayed and will be presented to the Sub-Committee in September 2025 as part of the 2025/26 IA plan. The report pack also includes an updated version of the Infrastructure Asset Selection, Management & Oversight audit report, previously presented to the Sub-Committee in March 2025. The report pack also notes that the 2024/25 IA annual report and overall conclusion on the effectiveness of LPF's governance, risk management and control frameworks is presented to the Sub-Committee in a separate paper, and notes progress with implementation of agreed management actions from previously completed audits, and timescales for competition of Audits included in the approved 2025/26 IA Plan.

Fraud Prevention

The sub-committee will receive a report on fraud prevention. The report is expected to cover:

• The Fund's policy on fraud prevention
• Arrangements in place to prevent and detect fraud
• Any instances of fraud that have occurred
• Actions taken to mitigate the risk of fraud

Quarterly Governance Update

The sub-committee will receive a quarterly governance update from Kimberley Russell, Company Secretary, Lothian Pension Fund. The update is expected to cover:

• Key developments in governance
• Committee and Pension Board training
• A review of the future agenda for the Pensions Committee and Pensions Audit Sub Committee
• An update on broader developments relevant to the fund

The report pack includes a letter from the Scottish Local Government Pension Scheme Advisory Board (SAB) regarding resourcing for effective pension fund delivery. The letter highlights the importance of resourcing in service delivery and encourages administering authorities to ensure that pension funds are appropriately resourced to meet statutory obligations and maintain high standards of service.

Minute and Action Tracker

The sub-committee will be asked to approve the minute of the sub-committee meeting of 23 June 2025 as a correct record. The sub-committee will also be asked to approve the Action Tracker as a correct record. The Action Tracker includes the following open action:

• LPF Chief Finance Officer to note that consideration would be given in due course, potentially as part of the next annual review of the Non-Audit Services Policy, to Audit Scotland's policy.

Private Business

The sub-committee is expected to consider a risk and compliance update in private, as it would involve the disclosure of exempt information as defined in Paragraph 6 of Part 1 of Schedule 7A of the Local Government (Scotland) Act 1973².