ITEM PF18
PENSION FUND COMMITTEE - 28 MAY 2008
STATUS OF THE PENSION FUND
Report of Assistant Chief Executive & Chief Finance Officer and County Solicitor
Introduction
1. The Pension Fund Committee on 21 February 2008 requested a report on the status of the pension fund and which contract/procurement rules and Regulations the Committee has to comply with. The County Solicitor as the Responsible Officer for the Contract Procedure Rules within the Constitution was requested to provide a definitive response with regards to this matter. This report constitutes his advice.
2. The County Solicitor has previously provided this Committee with a detailed summary of the duties and responsibilities of the Pension Fund Committee Members, the last report being on 24 November 2006.
Status of the Pension Fund
3. The Local Government Pension Schemes are administered under the Superannuation Act 1972 and subsequent Regulations. Section 7 of the 1972 Act empowers the Secretary of State to make Regulations for the provision of pensions for people employed in Local Government, and the Local Government Pension Scheme Regulations 1995, 1997, 2007 and 2008 contain detailed provisions for the administration of pension funds by “Administering Authorities”. The Regulations impose specific duties on Administering Authorities as to the investment of the assets of the fund, which is their responsibility, but in addition to this, there is EU and national procurement legal requirements as well as the Authority’s own procedures for ensuring matters are dealt with properly.
4. Oxfordshire County Council is the Administering Authority in relation to the pensions funds, which are held not for the benefit of just employees of the County Council but also employees from other public bodies. Oxfordshire County Council, however, as Administering Authority has the statutory responsibility for the proper administration of the fund. The Pension Fund Committee itself has a wider membership than simply drawn from the County Council and includes District Council representatives who are Voting Cooptees.
5. The Constitution sets out the rules and procedures under which the County Council operates. In order to fulfil its obligation for the proper administration of the fund, the Terms of Reference of the Pension Fund Committee are set out in the Constitution, Section I, “Other Committees”. This is the governance framework under which the Pension Fund therefore operates.
The Contract Procedure Rules
6. Within the Constitution, the Council Procedure Rules, Section D, paragraph 22 (D) (page D17), specifically states that the Council Procedure Rules should apply to meetings and Sub-Committees of the Council unless different rules and procedures apply eg. Cabinet Procedure Rules and Standards Committee.
7. The Contract Procedure Rules set out the framework under which procurement for the supply of goods, services and works is to be undertaken by this Council.
8. Section N, paragraph 3 of the Constitution requires that every contract made by the Council complies with the Contract Procedure Rules. Contracts made by the Council in performance of its functions as Administering Authority of the Pension Fund are thus subject to those Contract Procedure Rules.
9. In Finance, Contracts and Legal
matters, Section N, paragraph 2, it states the following: (a) “Every contract made by the Council will comply with the Contract Procedure Rules set out in Section CC of this Constitution and any guidance made under those rules.”
10. It is further stipulated in the Contract Procedure Rules themselves at 2.5 (page CC3) that:
(a) “The Rules must be complied with by all Officers of the Council and all other persons who are authorised to carry out procurement and contracting on behalf of the Council (such other Council’s agents for property services) (agents). It must be a term of all contracts between the Council and its agents that the agents comply with the Rules.”
11. In certain circumstances, if the Contract Procedure Rules do not provide an appropriate framework then to ensure that the proposed action does, nevertheless, conform with statutory provisions there is provision for an exemption to be granted following the provision of a legal appraisal from the County Solicitor and a financial appraisal from the Chief Finance Officer (Section 151 Officer).
12. The Contract Procedure Rules are not simply internal rules but to follow those Rules ensures that the Council fully complies with all EU and national procurement requirements as well as being able to demonstrate principles of fairness, transparency, non-discrimination and proportionality in the way that it conducts its business in a competitive market (“The EU Principles”). The Rules themselves are not there simply as a bureaucratic process but a means by which we can ensure that matters are dealt with properly. This is a key issue for the County Solicitor, as Monitoring Officer, as he has a statutory responsibility under the Local Government and Housing Act 1989 to ensure the lawful decision making of the Council.
13. The majority of contracts entered into in relation to the pension fund constitute contracts for financial services, which are designated “Part A Services” under the Public Contracts Regulations 2006 (which in turn have been produced in order to comply with EU law). A Part A Service contract, which is above the EU value threshold (ie. whole life value is estimated to be £139,893 or above) is subject to the full rigours of the Public Contracts Regulations and save in a few very exceptional circumstances must be tendered. In short, the requirement for tendering for most pension fund contracts is a statutory requirement under the Public Contract Regulations. The Contract Procedure Rules are complementary to that legal requirement and provide the means by which this can be done properly.
14. The County Solicitor refers to his previous report to the Pension Fund Committee on the responsibilities of the Members as “Trustees” of the Pension Fund and their fiduciary duty. In many cases, failure to comply with the statutory provisions can result in a fine being levied against the individual or against the Authority and where appropriate criminal breach of the provisions could result in prosecution. The Audit Commission itself have special powers to inspect and protect the interests of Council taxpayers to ensure that Local Authorities have acted lawfully in its financial transactions. The Trustees themselves have a duty to conduct the administration of the pension scheme in a fair business like manner with reasonable care, skill and caution and with a regard to the interests of others. These obligations are, therefore, higher than simply weighing up decisions and coming to a reasonable conclusion. There is an implicit expectation that proper care and skill will be applied in making decisions relating to the pension scheme. This is reinforced by the obligations to take proper advice at reasonable intervals and in addition to have regard to the investment principles as specified by CIPFA. Compliance with the Contract Procedure Rules ensures that Pension Fund Committee Members are able to demonstrate that they have exercised their judgement in accordance with the law and proper practice.
Conclusion
15. The County Council has a statutory responsibility for the proper administration of the Oxfordshire Pension Fund. The framework under which it fulfils this responsibility is the Constitution. The Constitution requires meetings and Sub-Committees of the Council, e.g. the Pension Fund Committee, to comply with the Contract Procedure Rules. These rules enable the Council to comply with national and EU requirements.
RECOMMENDATION
16. The Committee is RECOMMENDED to note the report.
SUE SCANE Assistant Chief Executive & Chief Finance Officer
PETER G CLARK County Solicitor and Monitoring Officer
13 May 2008
Contact officers: Peter Clark Tel: (01865) 815363 Paul Gerrish Tel: (01865) 815401
May 2008
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