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Agenda Item 19 Enclosure KPCT/08/122

NHS KIRKLEES Report To:

PCT Board

Title:

Audit Committee Annual Report

FOI Exemption Category

Open

Lead Director:

Tony Gerrard Non-executive Director

Author:

Tony Gerrard

Key Points to Note:

The paper outlines Audit Committee activity in 200809 It is the view of the Audit Committee that the PCT’s system of integrated governance, risk management and internal control is operating effectively.

Budget Implications:

No additional financial implications

Risk Assessment:

No additional risk identified in the report

Legal Implications:

None

Health Benefits:

Not applicable

Staffing Implications:

Not applicable

Sub Group/Committee:

Audit Committee

Recommendation:

The Board is asked to RECEIVE and NOTE the report and comment as appropriate

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KIRKLEES PRIMARY CARE TRUST AUDIT COMMITTEE ANNUAL REPORT TO 31 MARCH 2009 1.0

2.0

3.0

Purpose of Report 1.1

To demonstrate to the Trust Board that the Audit Committee has met its Terms of Reference

1.2

To indicate areas for development in 2009-10, arising from a recent selfassessment carried out by the Committee.

1.3

To assure the Trust Board that the PCT’s system of integrated governance, risk management and internal control is effective.

Background 2.1

The Audit Committee is established and constituted to provide the PCT Board with an independent and objective review of its financial systems, financial information and compliance with laws, guidance and regulations governing the NHS.

2.2

The Committee’s Terms Of Reference, modelled on NHS guidance, cover the following areas: Governance, Risk Management and Internal Control; Internal Audit; External Audit; Management; and, Financial Reporting.

Governance, Risk Management and Internal Control “The Committee shall review the establishment and maintenance of an effective system of integrated governance, risk management and internal control, across the whole of the organisation’s activities (both clinical and non-clinical) that supports the achievement of the organisation’s objectives” 3.1

The Committee considered and, after some amendments, accepted the Statement of Internal Control. In so doing, it took into account the Annual Governance Report from the external auditors.

3.2

The Board Assurance Framework has been considered and discussed. A particular focus was applied to its links with the Risk Register and the efforts being made to both link the Framework with the organisation’s objectives and ensure that detailed risks were captured and managed at an appropriate level.

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4.0

3.3

The Committee receives regular updates from the Local Counter Fraud Specialist. It also responded to a request from our external auditors on the PCT’s Compliance With International Auditing Standards on Fraud and Laws And Regulations.

3.4

One of the key priorities for the Internal Audit Service has been the PCT’s governance arrangements; the Committee has received and reviewed relevant reports which have indicated substantial assurance.

3.5

The Committee receives and considers the minutes of the Governance Committee at each meeting. The minutes are accompanied by a summary, highlighting the key points considered or arising from the meeting. At present, the non-executive director sitting on the Governance Committee is also a member of the Audit Committee.

Internal Audit “The Committee shall ensure that there is an effective Internal Audit function established by management that meets mandatory NHS Internal Audit Standards and provides appropriate independent assurance to the Audit Committee, Chief Executive and Board.”

5.0

4.1

The internal audit function is currently provided by the West Yorkshire Audit Consortium which operates at arms length from its clients.

4.2

The Committee has received and approved the internal audit plan. It receives Audit Planning Memos which allow: greater understanding of the work being carried out by the Consortium; a judgement in advance of the level of assurance to be gained from this activity; the ability to influence, where appropriate, the scope of audits.

4.3

Internal Audit report progress at each meeting of the Committee. Their major findings are presented and discussed. Where appropriate, the relevant PCT manager attends to discuss the actions to be taken to rectify any weaknesses identified.

External Audit “The Committee shall review the work and findings of the External Auditor appointed by the Audit Commission and consider the implications and management’s responses to their work.” 5.1

The Annual plans of both Internal and External Audit are considered in tandem by the Committee. It is clear that detailed co-ordination takes place to avoid duplication of effort.

5.2

The Committee received and approved the external audit plan. 4


6.0

5.3

As with Internal Audit, the External Audit function attends each meeting and contributes to discussions and the Committee’s understanding of the issues under consideration.

5.4

The Committee received and accepted a number of External Audit reports, including: a review of the Payment by Results Data Assurance Framework at Mid Yorkshire Hospitals Trust; an interim report on a study of Health Inequalities in Kirklees; Governance and Management Arrangements at The Health Infomatics Service; and, Better Commissioning. It reviewed the recommendations and their implementation, where appropriate.

5.5

The Audit Commission has provided information on models available to enhance the Committee’s ability to assess the effectiveness of both the External and Internal Audit functions.

Management “The Committee shall request and review reports and positive assurances from Directors and Managers on the overall arrangements for governance, risk management and internal control.”

7.0

6.1

The Committee has received reports and presentations on the governance arrangements in place for the separation of the commissioning and provider arms of the PCT. It has also considered its own arrangements given its role as Audit Committee for all parts of the PCT.

6.2

The Director of Finance and his staff have presented a number of reports, including: Use of Resources indicators; Faster Closure of Accounts; Impact of International Financial Reporting Standards.

6.3

The Committee has considered and approved a Revised Code Of Business Conduct and Commercial Sponsorship produced by the Director Of Corporate Services.

Financial Reporting “The Audit Committee shall review the Annual Report and Financial Statements before submission to the Board. The Committee should also ensure that the systems for financial reporting to the Board, including those of budgetary control, are subject to review as to the completeness and accuracy of the information provided to the Board” 7.1

The Committee considered both draft and audited financial statements, including compliance with accounting policies and significant adjustments resulting from the audit. The Committee was happy to endorse the statements for approval. 5


8.0

7.2

The Auditors Local Evaluation (ALE) provides, inter alia, an objective judgement on the financial reporting in the organisation. The Committee receives both an internal self-assessment and the external audit view.

7.3

The Committee receives the minutes of the Finance and Performance Committee, together with a summary report highlighting the key issues discussed or arising fom the meeting. It is represented on Finance and Performance Committee by a non-executive director.

Audit Committee Self-Assessment The Committee recently undertook its second annual self-assessment using a model produced by the Audit Commission, based on the NHS Audit Committee Handbook. The survey was not limited to the non-executive directors but also completed by regular attendees. The Handbook offers a checklist of matters to be considered, differentiating between: ‘must do’, those items which are essential for minimum standards of governance; ‘should do’, those items which are important for effective governance; and, ‘could do’, actions which are helpful for efficient, integrated governance. The results were collated, moderated and commented on by the Audit Commission and are outlined below, together with my comments as Chair of the Audit Committee following Committee consideration. 8.1

Must Do As in the previous exercise, no significant gaps or weaknesses were identified.

8.2

Should Do The number of areas requiring attention has reduced. Areas suggested for improvement are as follows:

8.2.1 Are changes to the Committee’s current and future workload discusses and approved at Board level? The Annual report and Annual Plan/Timetable are reported to Trust Board. If significant changes were proposed, these would be reported via Audit Committee minutes. 8.2.2 Does the Committee assess the effectiveness of Internal Audit and the adequacy of staffing and resources within Internal Audit?

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Internal Audit is subject to triennial review by External Audit. The Committee receives updates on Internal Audit activity at every meeting and meets in private with the Head of Internal Audit on a regular basis. The Committee has now received examples of effectiveness assessment from elsewhere and will discuss how to adapt this methodology. 8.2.3 Does the Committee assess the performance of External Audit? There is no formal process in place at present. The External Auditor has provided examples used elsewhere which will be discussed by the Committee as part of its 2009-10 Plan. 8.3

Could Do The Committee focussed its attentions on the ‘should do’ gaps during the year. As a result there is still scope to improve across most of these areas. Some of these merely require current deliberations to be formalised or procedures to be identified for dealing with issues which might occur in the future. Others will require further work but would unarguably be considered best practice. The bulk of these will be addressed during the 2009-10 year.

It is proposed that the self-assessment be repeated next year, with the intention of reporting the results in the next Annual Report. 9.0

Conclusion On the basis of the above activity, it is the view of the Audit Committee that the PCT’s system of integrated governance, risk management and internal control is operating effectively.

10.0

Acknowledgements The Committee has been supported throughout the year by the Directors of Finance and Corporate Services and their staff, the Audit Commission, West Yorkshire Audit Consortium, Local Counter Fraud Service. Various senior PCT managers have attended as appropriate. The Committee wishes to acknowledge its gratitude for their efforts.

11.0

Recommendation That the Board receives and notes this report and comments as appropriate.

Tony Gerrard Audit Committee Chair 10 May 2009 7


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