NHS Wales Shared Services Partnership Procurement Services Velindre NHS Trust NHS Wales Shared Services Partnership

Transcription

1 NHS Wales Shared Services Partnership Procurement Services Velindre NHS Trust NHS Wales Shared Services Partnership Audit year: Issued: July 2015 Document reference: 389A2015

2 Status of report This document has been prepared for the internal use of Velindre NHS Trust NHS Wales Shared Services Partnership as part of work performed in accordance with statutory functions. No responsibility is taken by the Auditor General or the staff of the Wales Audit Office in relation to any member, director, officer or other employee in their individual capacity, or to any third party. In the event of receiving a request for information to which this document may be relevant, attention is drawn to the Code of Practice issued under section 45 of the Freedom of Information Act The section 45 Code sets out the practice in the handling of requests that is expected of public authorities, including consultation with relevant third parties. In relation to this document, the Auditor General for Wales and the Wales Audit Office are relevant third parties. Any enquiries regarding disclosure or re-use of this document should be sent to the Wales Audit Office at info.officer@audit.wales. The team who delivered the work comprised Ann-Marie Harkin, Tracy Veale, Gillian Gillett and external auditors of Welsh NHS bodies Page 2 of 14 - NHS Wales Shared Services Partnership Procurement Services - Velindre NHS Trust NHS Wales Shared Services Partnership

3 Contents We have not identified any significant issues within the Procurement Services managed by the NHS Wales Shared Services Partnership. Weaknesses identified previously have been addressed but there are some areas where arrangements could be strengthened. Summary report Summary 4 No significant issues have been identified in the accounts payable or supporting nationally hosted NHS IT systems however there are areas where improvements could be made Relevant contracts had the required ministerial approval and weaknesses in procurement functions operating between and Cardiff & Vale University Health Board have been addressed Relevant internal controls were operating effectively within Bridgend stores but segregation of duties should be maintained and the audit trail could be strengthened Appendices Audit recommendations identified during Page 3 of 14 - NHS Wales Shared Services Partnership Procurement Services - Velindre NHS Trust NHS Wales Shared Services Partnership

4 Summary report Summary 1. In November 2014, we presented a paper to Velindre NHS Trust s (the Trust) Audit Committee for Shared Services NHS Wales Shared Services Partnership Audit Assurance Arrangements. This paper sets out the audit assurance arrangements for external audit in line with the requirements of International Standards on Auditing (UK and Ireland) (ISAs) relevant to those services provided by NHS Wales Shared Services Partnership (). 2. ISA 402 Audit considerations relating to an entity using a service organisation requires the Trust s audit team, as the service organisation auditor, to provide reasonable assurance to the auditor of the user entity (local audit teams) which includes an opinion on: the description of the service organisations system, control objectives and related controls; the suitability of the design of the controls to achieve the specific control objectives, and the operating effectiveness of the controls; and a description of the tests of the controls and the results thereof. 3. This report considers ISA402 in relation to the provision of assurance to the external audit teams of health bodies (local audit teams) on - Procurement Services (PS), with specific focus on: the accounts payable system; compliance with the Welsh Government s requirement to approve all health board contracts in excess of 1 million; and aspects of the Supply Chain stores system in Bridgend. 4. provides Procurement Services to the 10 Welsh health bodies (seven health boards and three trusts) and Welsh Government. During , the South Wales accounts payable services (excluding Withybush) were centralised in Companies House, Cardiff and responsibility for Supply Chain stock transferred to on 1 April We have agreed procedures to ensure that all matters identified by the Trust s audit team and local health auditors are captured and reported appropriately to the right audiences and these were set out in our paper Arrangements for reporting issues relating to services provided by the NHS Wales Shared Services Partnership. 6. Overall, based on our audit work and the audit work undertaken by local audit teams, we have concluded that no significant issues have been identified within the Procurement Services managed by the. There are however some areas where arrangements could be strengthened. 7. The following section of this report outlines the work we have undertaken and our findings and conclusions in more detail. - Audit and Assurance Services (A&AS) have reported their recommendations to the Trust s Audit Committee for Shared Services. They have not been reproduced in this report. No significant issues have been identified in the accounts payable or supporting nationally hosted NHS Page 4 of 14 - NHS Wales Shared Services Partnership Procurement Services - Velindre NHS Trust NHS Wales Shared Services Partnership

5 IT systems however there are areas where improvements could be made Local audit teams have not identified any significant issues in respect of the accounts payable system operated by Procurement Services but processes around disputed invoices and vested assets should be reviewed in conjunction with local health bodies 8. Local audit teams of individual health bodies decide how they will obtain assurance on non pay expenditure processed through the accounts payable system. They consider whether testing of the key controls within the system or substantive testing of the figures produced by the system provides the required assurance in the most efficient way. 9. Local audit teams have completed their programmes of work, and have not reported any significant issues in respect of the accounts payable system. They did however identify some matters identified where -PS could make improvements: Public Sector Payment Policy 10. The local audit team of Aneurin Bevan University Health Board (ABUHB) reported to their Audit Committee in their ISA260 report that all invoices which have been under dispute are considered as paid within 30 days although there is no guarantee that payment was made within 30 days of resolution of the dispute. Although not material, it produces a favourable Public Sector Payment Policy (PSPP) performance. 11. ABUHB informed their local audit team that the Oracle system is unable to track the date that a disputed invoice is resolved and then subsequently paid. 12. In addition, the local audit team of ABUHB informed us that ABUHB intends to formally escalate its concerns over the ongoing delays in the accounts payable function which impacts on its ability to comply with the PSPP target. Although ABUHB recognises that they also need to take action in this area, they are intending to seek agreement to a timescale for improvements, some indicators of progress along the way and some performance indicators for future services. Page 5 of 14 - NHS Wales Shared Services Partnership Procurement Services - Velindre NHS Trust NHS Wales Shared Services Partnership

6 Transfer of title of assets 13. The local audit team of Cardiff and Vale University Health Board (CVUHB) reported an issue in their ISA260 report in respect of the capitalisation of assets which had not yet been delivered. In such cases, the supplier and (on behalf of CVUHB) sign CVUHB s pro-forma Transfer of Title agreement. The Transfer of Title agreement states that title in the goods shall pass to the Authority on delivery to the Authority at the storage point named in the contract. For the items tested by the local audit team, there was no reference to the actual storage point in the Transfer of Title agreement. CVUHB have agreed that, in conjunction with PS, they would review the arrangements in place for vesting assets and would update the pro-forma Transfer of Title agreement to record details of the agreed storage point. CVUHB also agreed that they will obtain written confirmation from the supplier as evidence that the goods have actually been delivered to the agreed storage point. Recommendation PS PS Central e-business Services Team should discuss with Patech the option of updating Oracle to track the payment of disputed invoices. - PS and CVUHB should review the arrangements in place for vesting assets and update the pro-forma Transfer of Title agreement to record details of the agreed storage point. We have not identified any significant IT infrastructure or application issues within the nationally hosted NHS IT systems 14. International Auditing Standards 315 (ISA 315) Understanding the entity and its environment and assessing the risks of material misstatement requires auditors to gain an understanding of the general IT controls of the material financial systems used by the entity. In accordance with ISA 315 requirements, the Wales Audit Office IT audit team undertakes a review of the relevant systems within NHS Wales to which the ISA315 applies and provides assurances to the local audit teams. 15. As part of the Nationally Hosted NHS IT Systems Review, the Wales Audit Office IT audit team provides assurance to local audit teams on the Oracle Financial Management System (FMS) which is provided to all Welsh health bodies by Patech and managed by the s Central e-business Services Team and includes the accounts payable system. 16. As a result of the work undertaken on the Oracle FMS, the Wales Audit Office IT audit team confirmed that it has not identified any significant IT infrastructure or application issues likely to result in a material misstatement within the Oracle FMS. 17. The IT audit team will provide separate Nationally Hosted NHS IT Systems Reports to and the Audit Committee for Shared Services setting out the detailed findings for Oracle FMS. Relevant contracts had the required ministerial approval and weaknesses in procurement functions operating Page 6 of 14 - NHS Wales Shared Services Partnership Procurement Services - Velindre NHS Trust NHS Wales Shared Services Partnership

7 between and Cardiff & Vale University Health Board have been addressed 18. Local audit teams of NHS Trusts and Local Health Boards (LHBs) must consider the regularity of income and expenditure incurred during the year in order to conclude on the regularity opinion. LHB contracts above 1 million require ministerial approval if not entered into under a specific regulatory power. Failure to obtain this approval will result in the expenditure being irregular and a qualified regularity opinion if material. 19. As part of our work to provide assurance to health board audit teams, the Trust s audit team compared the central database of contracts awarded by against the Welsh Government list of approved contracts and concluded that there were no contracts above 1 million which had not had the required ministerial approval. 20. Last year, the local audit team of CVUHB reported to their Audit Committee that there were a number of significant weaknesses in the arrangements over the CVUHB s procurement function, which is operated in association with. In particular, CVUHB had not received ministerial approval for a number of contracts (or contract extensions) over 1 million. These included contracts that spanned into the financial year and contracts that were extended into without ministerial approval. Since that time CVUHB, in association with, has acted to address the weaknesses identified. A&AS has undertaken a detailed review and has provided reasonable assurance over the procurement arrangements at CVUHB. A&AS presented their report Procurement Services Audit Review: Cardiff & Vale Local Procurement Team to the June 2015 Audit Committee for Shared Services. Relevant internal controls were operating effectively within Bridgend stores but segregation of duties should be maintained and the audit trail could be strengthened 21. Responsibility for Supply Chain stock transferred to on 1 April 2014 and formed a significant part of Velindre NHS Trust s stock balance as at 31 March The Trust s audit team therefore documented and tested the relevant controls within the stores system and considered whether they accurately recorded the quantity and value of the stock held and reported on in the Trust s accounts. Our work focussed on the Bridgend store as this has the largest stock balance within the Trust s accounts. Page 7 of 14 - NHS Wales Shared Services Partnership Procurement Services - Velindre NHS Trust NHS Wales Shared Services Partnership

8 22. Our work found that relevant controls were in place within the Oracle Warehouse Information Management System (WIMS) and were operating as intended. However, we identified some areas where controls could be strengthened: Procedure notes are not in place covering the daily cycle count. There is no audit trail within WIMS when re-counts are performed and the system does not show who has undertaken the recount, who has authorised it and whether there was a stock variance which was written off. We understand that this has been logged with Patech. Segregation of duties is not always maintained as those involved in the stock taking process also have the ability to approve the cycle counts including write off's. In addition, senior manager approval is not required for write offs although write-offs are reported to senior managers. Local health bodies are not billed for stock they have ordered until they requisition it. For stock with a short shelf life, there is a risk therefore that the ordering health body will not requisition it before it expires and in such cases, it is unclear whether the ordering health body is responsible for the costs incurred. 23. We reported to Velindre NHS Trust in our ISA260 report that we had not been able to test the validity of the 464,000 residual creditor balance for stock balances that were transferred from Abertawe Bro Morgannwg University Health Board (ABMUHB) on 1 April The Trust could not provide us with a creditor listing or other documentation to support this balance. We understand that the is planning to review all creditor balances relating to the stores during Recommendation PS PS PS PS PS The - PS should develop formal procedure notes for the daily cycle counts, including authorisation levels write offs. The - PS Regional Supply Chain Manager (South and West Wales) should discuss with Patech updating WIMS to show the audit trail following re counts and write offs. The - PS should ensure that segregation of duties is maintained between officers responsible for the stock taking process and those able to authorise write offs. The - PS should clarify responsibility for the costs of short shelf life stock ordered but not requisitioned by health bodies. The PS should review all creditor balances relating to the stores during Page 8 of 14 - NHS Wales Shared Services Partnership Procurement Services - Velindre NHS Trust NHS Wales Shared Services Partnership

9 Appendix 1 Audit recommendations identified during Ref Issue Recommendation Priority responsibility and actions Completion date Accounts payable PS The Oracle system is unable to track the date that a disputed invoice is resolved and then subsequently paid. The Central e-business Services Team should discuss with Patech updating Oracle to track the payment of disputed invoices. Low It can be considered as part of the Oracle P2P development plan but alternatively, we certainly can identify if required the appropriate information. In terms of the comment regarding the disputed invoices for AB, it is appropriate that where disputes are identified and down to supplier error, (which is the criteria) then it is correct to consider these as non failures. March 2016 Page 9 of 14 - NHS Wales Shared Services Partnership Procurement Services - Velindre NHS Trust NHS Wales Shared Services Partnership

10 Ref Issue Recommendation Priority responsibility and actions Completion date PS The CVUHB s Transfer of title agreement states that title in the goods shall pass to the Authority on delivery to the Authority at the storage point named in the contract, but for the items tested by local auditors, there was no reference to the actual storage point in the Transfer of Title agreement. The - PS and CVUHB should review the arrangements in place for vesting assets and update the pro-forma Transfer of Title agreement to record details of the agreed storage point. Medium The vesting certificate used during year end was discussed at length with representations from the WAO audit team at CVUHB at time of the audit. The address on the vesting certificate identifies the registered address of the supplier which is mainly the same for the delivery location of the equipment. The testing undertook was for a vascular room which was vested into a bonded storage unit at a separate address, the purchase order was updated to reflect this information. procurement services will ensure that if the delivery point for vested equipment is different to the registered address on the vesting certificate, the information will be updated on the certificate. n/a Page 10 of 14 - NHS Wales Shared Services Partnership Procurement Services - Velindre NHS Trust NHS Wales Shared Services Partnership

11 Ref Issue Recommendation Priority responsibility and actions Completion date Supply Chain Stores PS Procedure notes are not in place covering the daily cycle count at Supply Chain stores in Bridgend. The - PS should develop formal procedure notes for the daily cycle counts, including authorisation levels write offs. Medium Head of Supply Chain: formal write off / write on process being developed with Finance team to take account of these comments. Will then be shared with Patech to see if can be incorporated in to the Oracle IT system. By 31 August 2015 PS There is not an audit trail on WIMS when re-counts are performed. The Regional Supply Chain Manager (South and West Wales) should discuss with Patech updating WIMS to show the audit trail following re counts and write offs. Medium Head of Supply Chain: formal write off / write on process being developed with Finance team to take account of these comments. Will then be shared with Patech to see if can be incorporated in to the Oracle IT system. By 31 August 2015 PS Segregation of duties is not maintained as those involved in the stock taking process also have the ability to approve the cycle counts including write off's. The - PS should ensure that segregation of duties is maintained between officers responsible for the stock taking process and those able to authorise write offs. High Head of Supply Chain: formal write off / write on process being developed with Finance team to take account of these comments. Will then be shared with Patech to see if can be incorporated in to the Oracle IT system. By 31 August 2015 Page 11 of 14 - NHS Wales Shared Services Partnership Procurement Services - Velindre NHS Trust NHS Wales Shared Services Partnership

12 Ref Issue Recommendation Priority responsibility and actions Completion date PS For stock with a short shelf life, it is unclear whether the ordering health body is responsible for the costs incurred. The - PS should clarify responsibility for the costs of short shelf life stock ordered but not requisitioned by health bodies. Low I believe this position is clear any cost on write offs rests with the Shared services and would be managed as part of the wider stock balances. This has been the same position for many years. Not required PS We were not able to test the validity of the 464,000 residual creditor balance for stock balances that were transferred from ABMUHB on 1 April 2014 as the Trust could not provide any supporting documentation for this balance. The - PS should review all creditor balances relating to the stores during High Head of Supply Chain / Finance Manager Will be reviewed at regular Inventory Position meetings held between Procurement and Finance so that assurance can be given in future. The creditor balance b/f will be validated during the year and either cleared or reprovided with evidence of validity. By 31 December 2015 Page 12 of 14 - NHS Wales Shared Services Partnership Procurement Services - Velindre NHS Trust NHS Wales Shared Services Partnership

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