REPORT TO TRUST BOARD. Paper Title: Fit and proper person test. Azara Mukhtar Director of Finance. Chris Harvey Interim Head of Corporate Governance

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1 Date: 10/2/15 Agenda No: 9.1 REPORT TO TRUST BOARD Date Paper produced: 28/01/15 Paper Title: Fit and proper person test Sponsoring Director (responsible for signing off report): Azara Mukhtar Director of Finance Author: Purpose/Decision required: Chris Harvey Interim Head of Corporate Governance Approve the approach to ensuring that the Trust can demonstrate the fit and proper person requirement (FPPR) for those appointees to whom the regulations apply. Approve the sign off process which is proposed to be established with immediate effect. Receive a further report in three months with an update on the actions as outlined above. Impact on Patient Experience: Implementing the fit and proper person test will help ensure the Trust s governance structure is robust which will contribute to providing high quality, safe and effective care for patients, carers, and members of the public. Impact on Financial Improvement None History: (which groups have previously considered this report) None Executive Summary The amendment to the Health and Social Care Act 2008 (Regulated Activities) Regulations 2014 which took effect from 27 th November 2014 has resulted in a new Directors Fit and Proper Persons test. All Executive and Non-Executive Directors appointed to the Board will need to meet the Directors Fit and Proper Persons requirements.

2 To be appointed or continue to be Director, individuals should be: Of good character Have the necessary skills and experience which are necessary for the relevant office or position or the work for which they are employed Be able to perform the role that they are employed for after reasonable adjustments are made Employment checks will need be undertaken in accordance with NHS Employment Check Standards issued by NHS Employers for both Executive and Non-Executive directors appointed to the Board including: Two references, one of which must be most recent employer Qualification and professional registration checks Right to work checks Proof of identity checks Occupational health clearance DBS checks in accordance with the Trust policy Search of insolvency and bankruptcy register Search of disqualified directors register An annual declaration for director and director-equivalent posts will be established Key Issues for discussion. Related Corporate Objective: To deliver high quality, integrated patient-centred services To ensure staff are able, empowered and responsible for the delivery of effective and compassionate care To achieve best practice performance standards To secure value for money and ensure the financial sustainability of the Trust To work with partners to improve the health and wellbeing of the people of Croydon. Related CQC 5 Key Areas of Care: Safe Effective Responsive Caring X Well-Led Has an equality impact assessment form been completed? No Has legal advice been taken? Does this report have any financial implication? No Yes If so, has the report been approved by the Financial Department? N/A

3 REPORT TO TRUST BOARD FIT AND PROPER PERSON TEST 1 Introduction With effect from 27 th November 2014, The Health and Social Care Act 2008 (Regulated Activities) Regulations 2014 (the 2014 Regulations ) place requirements on NHS provider organisations to ensure that director-level appointments meet the fit and proper person test (FPPT) also known as the fit and proper person requirement (FPPR). The Trust s ability to demonstrate that it can meet the requirements of the new regulations are required as part of the Care Quality Commission s (CQC s) registration requirements and now form part of the CQC s regulatory and inspection approach. 2 Fit and Proper Person Test (FPPT) The Fit and Proper Person Test is outlined in full in Regulation 5 of the 2014 Regulations and states that providers must not appoint a person to a director level post (including permanent and interim posts as well as associate directors) or to a non-executive director post unless he or she: Is of good character; has the qualifications, competence, skills and experience which are necessary for the relevant office or position or the work for which they are employed and is able by reason of his or her health and after reasonable adjustments are made, of properly performing tasks which are intrinsic to the office or position for which they are appointed or to the work for which they are employed. Furthermore, the regulation prohibits certain individuals from holding the office because they are unfit for a reason specified in Schedule 4 of the Regulations (for example, under a director s disqualification order) and, significantly, also excludes people who: have been responsible for been privy to, contributed to, or facilitated any serious misconduct or mismanagement (whether unlawful or not) in the course of carrying on a regulated activity, or providing a service elsewhere which, if provided in England, would be a regulated activity.

4 3 Who does the FPPT apply to? Under the 2014 Regulations, the FPPT requirements apply to individuals appointed or in place: (a) as a director of the service provider, or (b) performing the functions of, or functions equivalent or similar to the functions of, such a director. Trust is proposing that the FPPT applies to the following holders of office (whether on an interim or permanent basis): Chairman Non-Executive Directors Chief Executive Executive Directors Directors (including Business Unit Directors) Associate Directors Deputy Directors 4 Meeting the Requirements of the FPPT - Trust In order to meet the requirements of the FPPT the Trust is required to: Provide evidence that appropriate systems and processes are in place to ensure that all new directors and existing directors are, and continue to be, fit, and that no appointments meet any of the unfitness criteria set out in Schedule 4 of the regulation. This means that board directors should be of good character, have the required skills, experience and knowledge and that their health enables them to fulfill the management function. None of the criteria of unfitness should apply, which includes bankruptcy, sequestration and insolvency, appearing on barred lists and being prohibited from holding directorships under other laws. Directors should not have been involved or complicit in any serious misconduct, mismanagement or failure of care in carrying on a regulated activity. Make every reasonable effort to assure itself about an individual by all means available. Make specified information about board directors available to CQC. Be aware of the various guidelines available and to have implemented procedures in line with this best practice. Where a board member no longer meets the fit and proper persons requirement, inform the regulator in question where the individual is 4

5 registered with a health care or social care regulator, and take action to ensure the position is held by a person meeting the requirements. Directors may personally be accused and found guilty by a court of serious misconduct in respect of a range of already prescribed behaviours set out in legislation. Professional regulators may remove an individual from a register for breaches of codes of conduct. 5 Links between Individual FPPT and Board performance The CQC has stated that they recognise that individuals may be fit for their roles while, collectively, the board demonstrates a lack of fitness. The CQC has noted that they will address this in the most appropriate, relevant and proportionate approach on a case by case basis. 6 Role of the Trust The Trust is responsible for the appointment, management and dismissal of its directors. The Trust is responsible, as part of its recruitment and performance management processes, to ensure that FPPR is met. The Trust must ensure that the individual is suitable and appropriate - "Where, following the application of a robust process, a provider deems the individual suitable despite the individual being convicted of an offence and/or removed from the register of a professional health or social care regulator, the reasons should be recorded and information about the decision should be made available to those that need to be aware. " In other words, the Trust has to reach a conclusion that the individual meets the requirements of the regulation - you would need to demonstrate that the outcome of your investigation is that the individual is suitable, even if prima facie they may not be. 7 Approval and Sign off of meeting the Fit and Proper Persons Requirement The Trust has a responsibility to have a formal mechanism to ensure that the appropriate declaration and due diligence has been undertaken in relation to ensuring that its Directors meet the FPPR. A formal sign off process for the Trust is proposed as outlined below to ensure that there is sufficient robustness within the process. Role Approval by: Sign off by: Director level Chief Executive Chairman Chief Executive Chair of Finance and Performance Committee Chairman Chairman Chair of Finance and Performance Committee Chair of Audit Committee 5

6 . 8 Regulatory Breach It is a breach of the 2014 Regulations to have in place someone who does not satisfy the FPPR. Evidence of this could be if: A director is unfit on a mandatory ground, such as a relevant conviction or bankruptcy. The Trust must determine this. A provider does not have a proper process in place to enable it to make the assessments required by the FPPR. On receipt of information about a director s fitness, a decision is reached on the fitness of the director that is not in the range of decisions that a reasonable person would make. The CQC will now be able to take enforcement action for breaches of the fit and proper person requirement, in accordance with their Judgment Framework and Enforcement Policy. Where a breach is identified, the CQC will use existing regulatory powers. Breaches of other regulations may give the CQC cause to question whether they have resulted from a breach of this regulation. 9 Inspection Approach The CQC will check and monitor the extent to which the Trust meets the regulation at the point of registration (if any further subsidiary organisations are registered separately), during their inspections, on receipt of concerning information, and where there is a serious systemic failure of a provider. The Trust will be required by CQC to: Clearly articulate and demonstrate an understanding of the requirements of the regulation. Provide evidence of the systems that are in place to ensure that they will be able to meet the requirements of the regulation. Provide a self-declaration by the Chair of the Trust that appropriate checks have been undertaken in reaching a judgment that all directors are deemed to be fit and none meet any of the unfit criteria. Upon any concerns about an individual director, the CQC may ask the Trust to check their fitness and provide the relevant assurance to the CQC. Provide evidence during the inspection process under C Q C s Well Led - W3 key line of enquiry (KLOE). o W3: How does the leadership and culture reflect the vision and values, encourage openness and transparency and promote good quality care? Prompt: Do leaders have the skills, knowledge, experience and integrity that they need both when they are appointed and on an ongoing basis? Prompt: Do leaders have the capacity, capability and experience to lead effectively? 6

7 Provide evidence during inspection which may involve the checking of HR files and records about appraisal rates of directors. 10 Inspection Reporting The CQC will report on the FPPR under the well-led key area of care in their inspection report for the Trust. If the Trust does not meet the characteristics of good as described in the CQC handbooks a judgment will be made whether the Trust requires improvement or is inadequate for the purposes of regulation 5. If there is a serious systemic failure of the Trust, the CQC will carry out a focused inspection including the FPPR aspects of corporate failure. 11 Additional Sources of Information The CQC have announced that there are some core public information sources about providers that they believe that the providers can use as part of its FPPR due diligence, and which they intend to make available centrally. This includes but is not limited to, information from public inquiry reports, serious case reviews and ombudsman reports, as outlined in their guidance. This information has not yet been published on their website. 12 Next Steps/Actions required to ensure compliance with the Regulations It is proposed that the following actions are completed by March 2015 to ensure full compliance with the regulations: Changes to pre-employment checks are made for new appointees to the Trust for the following roles: Chairman Non-Executive Directors Chief Executive Executive Directors Directors (including Business Unit Directors) Associate Directors Deputy Directors 12.2 Changes to pre-employment checks are required to include: Search of insolvency and bankruptcy register Search of disqualified directors register Evidence of values based recruitment Self-declaration of fitness including explanation of past conduct/character issues (where appropriate) Amended reference request template to cover full requirements of Regulation 5 New contract of employment template for new appointments 7

8 An exercise is undertaken to ensure that for the areas listed below, the Trust can produce sufficient evidence upon inspection. There will be a requirement for existing appointees to complete FPPT declarations and possibly some additional pre-employment checks. Relevant evidence to include: Remuneration/Nomination committee minutes available (showing evidence of debate, decisions, reasons for decisions and any recommendation to the Board of Directors (for EDs). Review of Job Descriptions for all Executive Directors and Non- Executive Directors NED/Executive Appraisal Frameworks NED competence framework Notes of ED appraisals Initial self-declaration of fitness including explanation of past conduct/character issues (where appropriate) On-going self-declaration of fitness including explanation of past conduct/character issues (where appropriate) within Executive/Non- Executive Appraisal documentation Review of all DBS checks for existing post holders Review of contracts of employment to include termination in the event of non-compliance and incorporation of maintenance of fitness to practice as a contractual requirement (service agreements or equivalent for NEDs) To develop a Trust Disclosure and Barring Service (DBS) policy in line with best practice as outlined by the Disclosure and Barring Service and NHS Employers To have regard to any further guidance relevant to the FPPR, including any joint guidance issued by CQC and the NHS Trust Development Authority, 12.5 That the sign off process is established as follows: Role Approval by: Sign off by: Director level Chief Executive Chairman Chief Executive Chair of Finance and Performance Committee Chairman Chairman Chair of Finance and Performance Committee Chair of Audit Committee 12.6 The Assurance Map presented at Appendix A is established 12.7 That Annual Fit and Proper Person Declaration presented at Appendix B is introduced with immediate effect. 8

9 13 Recommendations Approve the approach to ensuring that the Trust can demonstrate the FPPR for those appointees to whom the regulations apply Approve the sign off process which is proposed to be established with immediate effect. Receive a further report in three months with an update on the actions as outlined above.. 9

10 Appendix A Care Quality Commission Regulation 5: fit and proper person requirement for directors STANDARD ASSURANCE EVIDENCE Providers should make every effort to ensure that all available information is sought to confirm that the individual is of good character as defined in Schedule 4, Part 2 of the regulations. (Sch.4, Part 2: Whether the person has been convicted in the United Kingdom of any offence or been convicted elsewhere of any offence which, if committed in any part of the United Kingdom, would constitute an offence. Whether the person has been erased, removed or struck-off a register of professionals maintained by a regulator of health care or social work professionals.) Employment checks are undertaken in accordance with NHS Employers pre-employment check standards and include: Two references, one of which must be most recent employer qualification and professional registration checks right to work checks identity checks occupational health declaration DBS checks For Non-executive directors this is co-ordinated by the TDA appointments team. References Other pre-employment checks DBS checks where appropriate Signed declarations from applicants Register search results If a provider discovers information that suggests an individual is not of good character after they have been appointed to a role, the provider must take appropriate and timely action to investigate and rectify the matter. Disciplinary policy and procedure provides for such investigations. Revised contracts allow for termination in the event of noncompliance with regulations and other requirements. Contracts of employment (for EDs and director-equivalents) Terms and conditions of service agreements (for NEDs) issued by the TDA. Where a provider deems the individual suitable despite not meeting the characteristics outlined in Schedule 4, Part 2 of these regulations, the reasons should be recorded and information about the decision should be made available to those that need to be aware. Where specific qualifications are deemed by the provider as necessary for a role, the provider must make this clear and should only employ those This would be the subject of debate at the Remuneration Committee (for EDs and director-equivalents) and in liaison with the Appointments team at the TDA (for NEDs). The minutes would record such decisions. The Chair would take advice from internal and external advisors as appropriate. This requirement is included within the job description for relevant posts and is checked as part of the preemployment checks. Disciplinary policy and procedure Minutes of meetings. Person specification Recruitment policy and procedure 10

11 individuals that meet the required specification, including any requirements to be registered with a professional regulator. The provider should have appropriate processes for assessing and checking that the individual holds the required qualifications and has the competence, skills and experience required, (which may include appropriate communication and leaderships skills and a caring and compassionate nature), to undertake the role; these should be followed in all cases and relevant records kept. Employment checks include a candidate s qualifications and employment references. The recruitment process also includes values-based questions. Recruitment policy and procedure Values-based questions The provider may consider that an individual can be appointed to a role based on their qualifications, skills and experience with the expectation that they will develop specific competence to undertake the role within a specified timeframe. Any such decision would be discussed and recorded by the appointments panel and the appointed the TDA assessor on the panel. Actions would be subject to followup as part of ongoing review and appraisal. NED appraisal framework Executive Director PDRs When appointing relevant individuals the provider has processes for considering a person s physical and mental health in line with the requirements of the role. All executive directors are subject to a health declaration as part of the pre-employment process. Copy of the health declaration held on the director s personnel file Wherever possible, reasonable adjustments are made in order that an individual can carry out the role. This is already included in the Trust s disability policy. Disability Policy The provider has processes in place to assure itself that the individual has not been at any time responsible for, privy to, contributed to, or facilitated, any serious misconduct or mismanagement in the This will be incorporated as a specific declaration as part of the pre-employment process. It will be incorporated into the reference request for all Pre-employment declaration Reference Request for ED 11

12 carrying on of a regulated activity; this includes investigating any allegation of such potential behaviour. Where the individual is professionally qualified, it may include fitness to practise proceedings and professional disciplinary cases. ( Responsible for, contributed to or facilitated means that there is evidence that a person has intentionally or through neglect behaved in a manner which would be considered to be or would have led to serious misconduct or mismanagement. Privy to means that there is evidence that a person was aware of serious misconduct or mismanagement but did not take the appropriate action to ensure it was addressed. Serious misconduct or mismanagement means behaviour that would constitute a breach of any legislation/enactment CQC deems relevant to meeting these regulations or their component parts. ) The provider must not appoint any individual who has been responsible for, privy to, contributed to, or facilitated, any serious misconduct or mismanagement (whether lawful or not) in the carrying on of a regulated activity; this includes investigating any allegation of such potential behaviour. Where the individual is professionally qualified, it may include fitness to practise proceedings and professional disciplinary cases. director and director-equivalent posts. This will be incorporated as a specific declaration as part of the pre-employment process. It will be incorporated into the reference request for all director and director-equivalent posts TDA appoint process for NEDs Reference Request for Executive Directors TDA appoint process for NEDs Only individuals who will be acting in a role that falls within the definition of a regulated activity as defined by the Safeguarding Vulnerable Groups Act 2006 will be eligible for a check by the Disclosure and Barring Service (DBS). DBS checks will be undertaken as part of the recruitment process and for Non-executive director s prior to the renewal of the term. Disclosure and Barring Service Policy DBS checks for eligible postholders 12

13 (CQC recognises that it may not always be possible for providers to access a DBS check as an individual may not be eligible.) As part of the recruitment/appointment process, providers should establish whether the individual is on a relevant barring list. Will be assessed through the recruitment process DBS checks. DBS policy The fitness of directors is regularly reviewed by the provider to ensure that they remain fit for the role they are in; the provider should determine how often fitness must be reviewed based on the assessed risk to business delivery and/or the service users posed by the individual and/or role. Post-holders undertake annual declarations of fitness to continue in post. Checks of insolvency and bankruptcy register and register of disqualified directors to be undertaken each year as part of the appraisal process. (*) Annual declaration NED appraisal process ED appraisal process The provider has arrangements in place to respond to concerns about a person s fitness after they are appointed to a role, identified by itself or others, and these are adhered to. The disciplinary policy provides these arrangements, and revised contracts (for EDs and director-equivalents) and agreements (for NEDs) incorporate maintenance of fitness as a contractual requirement. Disciplinary policies ED contracts of employment NED agreements The provider investigates, in a timely manner, any concerns about a person s fitness or ability to carry out their duties, and where concerns are substantiated, proportionate, timely action is taken; the provider must demonstrate due diligence in all actions. This will be undertaken if concerns are identified and revised contracts provide for termination if individuals fail to meet necessary standards Director of HR reviewing employment contracts for ED TDA appointments team issuing guidance re NEDs. Where a person s fitness to carry out their role is being investigated, appropriate interim measures may be required to minimise any risk to service users. This would be reviewed on a case-by-case basis when concerns are identified Disciplinary policy. The provider informs others as appropriate about concerns/findings relating to a person s fitness; for This would be completed on a case-by-case basis if any concerns were identified. Referrals made to other agencies 13

14 example, professional regulators, CQC and other relevant bodies, and supports any related enquiries/investigations carried out by others. (*) indicates newly-introduced requirements to address the regulations In the table above, unless the contrary is stated or the context otherwise requires, ED means executive directors and director-equivalents. 14

15 Appendix B Annual declaration for director and director-equivalent posts ( the Trust ) FIT AND PROPER PERSON DECLARATION 1. It is a condition of employment that those holding director and director-equivalent posts provide confirmation in writing, on appointment and thereafter on demand, of their fitness to hold such posts. Your post has been designated as being such a post. Fitness to hold such a post is determined in a number of ways, including (but not exclusively) by the Trust s provider licence, the Health and Social Care Act 2008 (Regulated Activities) Regulations 2008 ( the Regulated Activities Regulations ) and the Trust s constitution. 2. By signing the declaration below, you are confirming that you do not fall within the definition of an unfit person or any other criteria set out below, and that you are not aware of any pending proceedings or matters which may call such a declaration into question. 3 An unfit person is defined as: (a) an individual: (i) who has been adjudged bankrupt or whose estate has been sequestrated and (in either case) has not been discharged; or (ii) who has made a composition or arrangement with, or granted a trust deed for, his creditors and has not been discharged in respect of it; or (iii) who within the preceding five years has been convicted in the British Islands of any offence and a sentence of imprisonment (whether suspended or not) for a period of not less than three months (without the option of a fine) was imposed on him; or (iv) who is subject to an unexpired disqualification order made under the Company Directors Disqualification Act 1986; or (b) a body corporate, or a body corporate with a parent body corporate: (i) where one or more of the Directors of the body corporate or of its parent body corporate is an unfit person under the provisions of sub-paragraph (a) of this paragraph, or (ii) in relation to which a voluntary arrangement is proposed under section 1 of the Insolvency Act 1986, or 15

16 (iii) which has a receiver (including an administrative receiver within the meaning of section 29(2) of the 1986 Act) appointed for the whole or any material part of its assets or undertaking, or (iv) which has an administrator appointed to manage its affairs, business and property in accordance with Schedule B1 to the 1986 Act, or (v) which passes any resolution for winding up, or (vi) which becomes subject to an order of a Court for winding up. Regulated Activities Regulations 4. Regulation 5 of the Regulated Activities Regulations states that the Trust must not appoint or have in place an individual as a director, or performing the functions of or equivalent or similar to the functions of, such a director, if they do not satisfy all the requirements set out in paragraph 3 of that Regulation. 7. The requirements of paragraph 3 of Regulation 5 of the Regulated Activities Regulations are that: (a) the individual is of good character; (b) the individual has the qualifications, competence, skills and experience which are necessary for the relevant office or position or the work for which they are employed; (c) the individual is able by reason of their health, after reasonable adjustments are made, of properly performing tasks which are intrinsic to the office or position for which they are appointed or to the work for which they are employed; (d) the individual has not been responsible for, privy to, contributed to or facilitated any serious misconduct or mismanagement (whether unlawful or not) in the course of carrying on a regulated activity or providing a service elsewhere which, if provided in England, would be a regulated activity; and (e) none of the grounds of unfitness specified in Part 1 of Schedule 4 apply to the individual. 8. The grounds of unfitness specified in Part 1 of Schedule 4 to the Regulated Activities Regulations are: (a) the person is an undischarged bankrupt or a person whose estate has had sequestration awarded in respect of it and who has not been discharged; (b) the person is the subject of a bankruptcy restrictions order or an interim bankruptcy restrictions order or an order to like effect made in Scotland or Northern Ireland; (c) the person is a person to whom a moratorium period under a debt relief order applies under Part VIIA (debt relief orders) of the Insolvency Act 1986; (d) the person has made a composition or arrangement with, or granted a trust deed for, creditors and not been discharged in respect of it; (e) the person is included in the children s barred list or the adults barred list maintained under section 2 of the Safeguarding Vulnerable Groups Act 2006, or in any corresponding list maintained under an equivalent enactment in force in Scotland or Northern Ireland; (f) the person is prohibited from holding the relevant office or position, or in the case of an individual for carrying on the regulated activity, by or under any enactment. 16

17 I confirm that I do not fit within the definition of an unfit person as listed above and that there are no other grounds under which I would be ineligible to continue in post. I undertake to notify the Trust immediately if I no longer satisfy the criteria to be a fit and proper person or other grounds under which I would be ineligible to continue in post come to my attention. Name: Signed: Position: Date: Once signed, a copy of this form must be placed on the individual s personal file and an additional copy sent to the Head of Corporate Governance for to save along with the individuals annual declaration of interest. 17

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