West Middlesex University Hospital NHS Trust

Transcription

1 July 2014 Government and Public Sector West Middlesex University Hospital NHS Trust Annual Audit Letter 2013/14 Audit

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3 PricewaterhouseCoopers LLP 7 More London Riverside London SE1 2RT The Audit Committee West Middlesex University Hospital NHS Trust Twickenham Road Isleworth Middlesex TW7 6AF 30 July 2014 Ladies and Gentlemen We are pleased to present our Annual Audit Letter summarising the results of our 2013/14 audit. Yours faithfully PricewaterhouseCoopers LLP Code of Audit Practice and Statement of Responsibilities of Auditors and of Audited Bodies In April 2010 the Audit Commission issued a revised version of the Statement of responsibilities of auditors and of audited bodies. It is available from the Chief Executive of each audited body. The purpose of the statement is to assist auditors and audited bodies by explaining where the responsibilities of auditors begin and end and what is to be expected of the audited body in certain areas. Our reports and management letters are prepared in the context of this Statement. Reports and letters prepared by appointed auditors and addressed to members or officers are prepared for the sole use of the audited body and no responsibility is taken by auditors to any member or officer in their individual capacity or to any third party.

4 Contents Introduction 1 Audit findings 2 Summary of recommendations 6 Final fees 9

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6 Introduction The purpose of this letter This letter provides West Middlesex University Hospital NHS Trust s (the Trust) Audit Committee with a high level summary of the results of our audit for 2013/14, in a form that is accessible for you and other interested stakeholders. We have already reported the detailed findings from our audit work to the Audit Committee in the following reports: Audit opinion for 2013/14 financial statements, incorporating the value for money conclusion; Our report to those charged with governance (ISA (UK&I) 260); Limited assurance report on the Quality Account 2013/14; and Long form report setting out our findings on the Quality Account for 2013/14. We have included in this report our significant audit findings. You can find a summary of our key recommendations on page 2. Scope of work We carry out our audit work in accordance with the Audit Commission s Code of Audit Practice (NHS), International Standards on Auditing (UK and Ireland) and other relevant guidance issued by the Audit Commission. You are responsible for preparing and publishing the Trust s financial statements, including the annual governance statement. You are also responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in your use of the Trust s resources. As auditors we need to: form an opinion on the financial statements; review the Trust s annual governance statement; form a conclusion on the arrangements that you have in place to secure economy, efficiency and effectiveness in your use of the Trust s resources; and carry out any other work specified by the Audit Commission, which this year comprised work on the Trust s Quality Account. We have carried out our audit work in line with our 2013/14 Audit Plan that we issued in January

7 Audit findings Accounts We audited the Trust s accounts in line with approved Auditing Standards and issued an unqualified opinion with an emphasis of matter on 6 June The emphasis of draws the reader s attention to the loan that the Trust has with the Department of Health, the ongoing challenges for the Trust in relation to its cash position and the uncertainty around the timing and completion of the proposed transaction with Chelsea & Westminster NHS Foundation Trust. The key issues affecting our 2013/14 audit were in relation to: The Trust s financial standing Value for Money conclusion Year end agreements with commissioners. Financial standing The Trust reported a deficit of 5.0m in its 2013/14 financial statements, which was in line with its budget. This followed three consecutive years where the Trust has recorded a surplus, including a surplus of 1.7m in 2012/13. For 2014/15 the Trust has forecast a deficit of 7.9m. To achieve this target, the Trust needs to deliver a Cost Improvement Plan (CIP) target of 6.4m, which represents 4% of the 2014/15 budgeted operating expenditure. At the end of month three the Trust has delivered a deficit of 1.5m which is below budget by 0.1m. At the end of month three the Trust has delivered CIPs of 0.7m which is below budget by 0.4m. Due to its historic financial performance the Trust had a cumulative deficit, per the breakeven note, of 18.1m at 1 April The deficit recorded in 2013/14 increased this to 23.1m at 31 March Repayment of this cumulative historic deficit represents a significant challenge to the Trust. As a result of the significant cumulative deficit, the ongoing liquidity pressures and the requirement to achieve Foundation Trust status the Trust board has consistently had to consider the Trust s long term future. In 2012/13 the Trust concluded that it could not achieve a viable Foundation Trust application by April 2014 which demonstrated financial viability in the short to medium term and it would therefore look to be acquired. The Trust Board announced in April 2013 that Chelsea and Westminster NHS Foundation Trust (CWFT) was the preferred acquirer. The transaction process continues to move forward, with due diligence being carried out by CWFT, and the proposed date for the transaction to take place is 1 April The transaction is still subject to significant approval processes and as such there is still uncertainty as to whether and when the transaction will occur. Due to its historic deficit, the Trust has had liquidity issues and has a significant outstanding loan with the Department of Health. As at 31 March 2013 this stood at 15.3 million, all due for repayment within the next 12 months. As in previous years, in 2013/14 the Trust failed to make any repayments on the outstanding loan balance. This was as planned in the Trust s budget, agreed with the NHS Trust Development Authority. The full balance of 15.3m therefore remains outstanding at 31 March We understand that the Trust is not budgeting to make any loan principal repayments in 2014/15. The Trust has received confirmation from the NHS Trust Development Authority that it will make sufficient cash financing available to the Trust over the next twelve month period so that the Trust is able to meet its current liabilities. This financial position has led us to include, as we have in previous years, an emphasis of matter in our audit opinion. This draws the reader s attention to the loan that the Trust has with the Department of Health, the ongoing challenges for the Trust in relation to its cash position and the uncertainty around the timing and completion of the ongoing transaction with Chelsea & Westminster NHS Foundation Trust. 2

8 The financial position has also lead to us modifying our opinion on the Value for Money conclusion as outlined below. Value for Money conclusion We carried out sufficient, relevant work in line with the Audit Commission s guidance, so that we could conclude on whether you had in place, for 2013/14, proper arrangements to secure economy, efficiency and effectiveness in your use of the Trust s resources. In line with Audit Commission requirements, our conclusion was based on two criteria: The organisation has proper arrangements in place for securing financial resilience; and The organisation has proper arrangements for challenging how it secures economy, efficiency and effectiveness. To reach our conclusion, we carried out a programme of work that was based on our risk assessment. The key issue arising from this programme of work for the Trust remains its financial position and the impact that this has on its arrangements for securing financial resilience. In particular, as set out above, the Trust continues to face challenges in relation to liquidity, due to its inability to make repayments on its loan to the Department of Health, and in relation to recovering its cumulative deficit. Given these two challenges we believe the Trust has been unable to put in place proper procedures to secure financial resilience and as such we issued a modified value for money conclusion. Year end agreements with commissioners At the date of signing the financial statements the Trust was still negotiating the year end income position with its commissioners. The income recognised in the 2013/14 financial statements represented management s best estimate of the expected outturn from the negotiations with the commissioners. The Trust had not recognised 4.8m of income in year to which it believed it was entitled, as it did not expect the commissioners to agree to pay for these amounts for 2013/14. The balance was made up of a number of items, the most significant of which are outlined below. Maternity Casemix 1.6m: To calculate the maternity income due, the Trust used a local case mix whereas the commissioners believe that a national case mix should be used. The case mix relates to the differing level of complexity of each case, and the income the Trust then receives. A national case mix would generate 1.6m less income, and due to the uncertainty of the outcome, the lower amount was recognised in the financial statements. CQUIN 0.9m The negotiations with the CCGs and NHS England on final CQUIN income were ongoing at the date of signing the financial statements. The Trust did not recognised the income relating to 0.9m of CQUIN as it believed it was possible it would not receive this amount. Of this balance the largest element, of 0.5m related to length of stay targets which the Trust had not achieved and therefore did not expect to receive the income. GUM activity 0.5m For 2013/14 the provision of Genitourinary Medicine activity was being funded by local authorities, since the cessation of PCTs. The Trust stated it was facing much greater challenge from the Local Authorities on this income stream and therefore dud not recognise 0.5m of income that it believes the Local Authorities may not agree to pay. Based on our audit testing performed on the income balance and income provisions we are satisfied that the income amount as stated in the financial statements is not materially incorrect 3

9 Control deficiencies No significant control deficiencies were identified. However, we draw your attention to the minor control recommendations detailed on page 6. Referrals to the Secretary of State We have a legal duty to report a matter to the Secretary of State where the Trust or one of your officers: a) is about to make, or has made, a decision which involves or would involve the Trust spending money unlawfully; or b) is about to take, or has taken, a course of action which, if pursued to its conclusion, would be unlawful and likely to cause a loss or deficiency. The Trust has incurred a deficit in 2013/14. As a result of this we are required to issue a referral to the Secretary of State under Section 19 of the Audit Commission Act We are in the process of drafting our referral letter. We expect to issue the final referral in August Annual Governance Statement (AGS) The aim of the AGS is to give a sense of how successfully the Trust has coped with the challenges it faces and of how vulnerable the organisation s performance is or might be, drawing on evidence on governance, risk management and controls. We reviewed the AGS to see whether it complied with relevant guidance and whether it was misleading or inconsistent with what we know about the Trust. We found no areas of concern to report in this context. Quality Account You have a legal duty to publish a Quality Account which must contain the elements required by Quality Accounts Regulations. The Department of Health agreed with the Audit Commission that Trust auditors would carry out work on the Quality Account in 2013/14, and issue a limited assurance conclusion on whether anything has come to our attention that causes us to believe that: the Quality Account is not prepared in all material respects in line with the information requirements prescribed in the Schedule referred to in Section four of the Regulations ( the Schedule ); the Quality Account is not consistent in all material respects with other sources; and the specified indicators in the Quality Account identified as having been the subject of limited assurance in the Quality Account have not been prepared in all material respects in accordance with Section 10c of the NHS (Quality Accounts) Amendment Regulations 2012 and the six dimensions of data quality set out in the NHS Quality Accounts - Auditor Guidance 2013/14 issued by the Audit Commission in February 2014 ( the Guidance ). We carried out this work in line with guidance issued by the Audit Commission. Our work comprised: obtaining an understanding of the design and operation of the controls in place in relation to the collation and reporting of the specified indicators, including controls over third party information (if applicable) and performing walkthroughs to confirm our understanding; based on our understanding, assessing the risks that the performance against the specified indicators may be materially misstated and determining the nature, timing and extent of further procedures; making enquiries of relevant management, personnel and, where relevant, third parties; considering significant judgments made by the management in preparation of the specified indicators; performing limited testing, on a selective basis of evidence supporting the specified indicators, and assessing the related disclosures; and reading documents. 4

10 This work was carried out in May and June 2014 and was reported to you on 30 June Our main findings from that work were: no issues came to our attention that led us to believe that the 2013/14 Quality Account was not consistent with the other information sources defined by the Audit Commission; no issues came to our attention that led us to believe that the Quality Account had not been prepared in accordance with the Regulations; and we raised three minor control recommendations as detailed on page 6. 5

11 Summary of recommendations Issue Recommendation Management s response Main audit Classification of Accruals and Accounts Payable During the course of our audit procedures we identified a number of accruals balances that had been incorrectly classified as accounts payable. Management performed a review and accruals totalling 1.8m were identified as incorrectly treated as accounts payable. This has been corrected in the final financial statements. Management should perform an exercise at each year end to ensure that all liabilities included in the Statement of Financial Position are correctly classified based on the characteristics of the liability. Management agrees to this recommendation. 6

12 Quality Accounts Rate of clostridium difficile infections We tested 25 cases to assess whether patients samples had been recorded as positive for C.Diff toxin on the Winpath laboratory system to provide comfort over the validity of the reported data. It was noted that for four of the 25 cases tested, the results of the tests performed on their stool samples had not been updated on Winpath. Updating of results on Winpath is the responsibility of the lab staff at Imperial College Hospital and following discussions with management, it was noted that this was a known issue early in the period following their switch to using the lab at Imperial from March The Trust identifies positive results correctly as they are also telephoned through by the lab at Imperial and has access to the Imperial College Hospital MiSyS laboratory system for its patients and checks for positive cases. For the four items sampled where records had not been updated on Winpath we have obtained reports directly from Imperial's laboratory system (Misys), which WMUH have ability to access and view samples for their patients. Management should ensure that where responsibility for updating Winpath is undertaken by a third party that it has adequate assurance that this is being undertaken promptly. The incidents detected during the audit occurred at the beginning of the new partnership arrangement with Imperial College Healthcare NHS Trust for Pathology services. The updating of reports on Winpath by Imperial staff now occurs promptly, and this is checked through review of "overdue" lists at appropriate intervals, to ensure any outstanding results are entered and released. Percentage of reported patient safety incidents resulting in severe harm or death The clinical governance team performs a secondary check over all moderate rated patient safety incidents to assess whether or not these should be rated as severe, and thus reported within this indicator. No audit trail is retained to evidence that this check occurs. No issues were noted from our testing to indicate that incident severity was being understated for the cases in our sample. Management should evidence this check to show that it is discharging its responsibilities for reporting appropriate severity of incident. There is an audit trail of the checks of the severity of incidents within Datix - this includes the change made and the person responsible. 7

13 Percentage of reported patient safety incidents resulting in severe harm or death It is Trust policy to record patient safety incidents on the Datex incident management system within one day of the incident occurring. In three of 20 cases tested it was noted that the cases had not been logged on Datex within 24 hours. This does not impact on the reporting of the indicator as the numerator for the indicator is based on the date of the incident rather than when it is reported. Management should reiterate the need for prompt reporting of incidents so that issues can be addressed expediently. Prompt reporting of incidents is reiterated at every opportunity from induction onwards. 8

14 Final fees We reported our fee proposals in our audit plan. Our actual fees charged were as follows: 2013/14 outturn ( ) 2013/14 fee proposal ( ) 2012/13 final outturn ( ) Financial statements and local value for 89,400 89,400 89,400 money conclusion scale fee Financial standing work 6,000 6,000 6,000 Quality account 10,000 10,000 14,127 Total audit fee * 105, , ,527 * We are continuing to workwith management and the Audit Commission to confirm the final additional fees to reflect the additional activities we were required to perform around the Trust s Annual Report and in relation to the referral to the secretary of state. These fees will be in addition to the fees outlined above 9

15 In the event that, pursuant to a request which you have received under the Freedom of Information Act 2000 (as the same may be amended or re-enacted from time to time) or any subordinate legislation made thereunder (collectively, the Legislation ), you are required to disclose any information contained in this report, we ask that you notify us promptly and consult with us prior to disclosing such information. You agree to pay due regard to any representations which we may make in connection with such disclosure and to apply any relevant exemptions which may exist under the Legislation to such information. If, following consultation with us, you disclose any such information, please ensure that any disclaimer which we have included or may subsequently wish to include in the information is reproduced in full in any copies disclosed PricewaterhouseCoopers LLP. All rights reserved. 'PricewaterhouseCoopers' refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the context requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.