NHS KIRKLEES AUDIT COMMITTEE ANNUAL REPORT TO 31 MARCH 2011 1
Purpose of Report 1.1
To demonstrate to the Trust Board that the Audit Committee has met its Terms of Reference.
To indicate areas for development in 2011-12.
To assure the Trust Board that the PCT’s system of integrated governance, risk management and internal control is effective.
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.
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 accepted the Statement of Internal Control. In so doing, it took into account the Head of Internal Audit Opinion which was confirmed by the Annual Governance Report from the external auditors.
The Board Assurance Framework has been kept under review. Further work has been carried out on the revised format. The identification of risks and their ownership by relevant sub-committees and management has been further scrutinised during the year. The Internal Audit view is that the Assurance Framework is now well embedded within the organisation.
The Committee receives regular updates from the Local Counter Fraud Specialist. It also considered the PCT’s Compliance with International Auditing Standards on Fraud and Laws and Regulations.
The Committee receives and considers the minutes of the Governance Committee at each meeting. The minutes are usually accompanied by a summary, highlighting the key points considered or arising from the meeting. At present, the 1
non-executive director sitting on the Governance Committee is also a member of the Audit Committee. 4.0
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.”
The internal audit function is currently provided by the West Yorkshire Audit Consortium which operates at arms length from its clients. The last Triennial Review conducted by the Audit Commission concluded that WYAC’s overall arrangements comply with the NHS Internal Audit Standards.
The Committee has received and approved the internal audit plan. The members of the Committee and other non-executive directors helped develop the Plan. The Committee members are still not receiving all Audit Planning Memos; this would 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; and, the ability to influence, where appropriate, the scope of audits. It has, again, been requested that this practice be reinstated.
Internal Audit report progress at each meeting of the Committee. Their major findings are presented and discussed. Significant attention has been paid to those audits where only limited assurance has been obtained. In the case of the Commissioning arm of the PCT this concerned Clinical Audit. In the case of Kirklees Community Healthcare Services these concerned: Infection Control; Travel Claims; and Tough Books. The Committee reviewed management action plans in these areas. Where appropriate, the relevant PCT manager attended to discuss the actions to be taken to rectify any weaknesses identified. Where necessary, update reports are received at each meeting.
Limited Assurance audit reports are referred to the relevant sub-committee for further consideration.
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.
The Committee received and approved the external audit plan.
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.
The Committee received and accepted a number of External Audit reports, including: a review of the Payment by Results Data Assurance Framework at CHFT; Yorkshire & Humber Specialist Commissioning Group; Area-Based Working. It reviewed the recommendations and their implementation, where appropriate.
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.”
The Committee has received reports and presentations on the Board Assurance Framework, the Risk Management System and Board Sub-Committee Risk Registers.
The Director of Finance presented an overview of the Financial Planning Cycle to assure the Committee that robust arrangements were in place to minimise the financial risks of tightened resources and significant change.
As part of its development plans for this year, the Committee had intended to scrutinise in detail arrangements for ensuring clinical quality were sufficiently robust. Consideration was delayed to receive the Internal Audit report on Clinical Audit. As a result, this area will be a key area of the Committee’s work in 2011-12.
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.
The Use Of Resources assessment by the Audit Commission provides, inter alia, an objective judgement on the financial reporting in the organisation. The report judged that: “The PCT’s financial reporting is timely, reliable and meets the needs of internal users, stakeholders and local people. Financial forecasts are subject to risk and sensitivity analysis. The financial reports to the Board highlight the key financial and performance issues and risks it needs to be aware of to support effective decision making.”
The Committee receives the minutes of the Finance and Performance Committee, together with a summary report highlighting the key issues discussed or arising from the meeting. It is represented on Finance and Performance Committee by a non-executive director.
Audit Committee Development The Committee had, until last year, undertaken an 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. Last year’s self-assessment was delayed to take account of new guidance to be contained in a new Audit Committee Handbook. The Handbook was finally received in May 2011. The issues raised by the new Handbook will be considered by the Committee during this financial year. As indicated above, a thorough review of the PCT’s quality framework will be conducted. The PCT is operating in a turbulent environment. Accordingly work on the risks attached to the development of GP Consortia and Cluster will form a focus for the Committee.
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.
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.
Recommendation That the Board receives and notes this report and comments as appropriate.
Tony Gerrard Audit Committee Chair 30 May 2011