Brighton and Sussex University Hospital NHS Trust

Transcription

1 Brighton and Sussex University Hospital NHS Trust Year Ending 31 March 2013 Annual Audit Letter July 2013 Ernst & Young LLP

2 Executive summary Ernst & Young LLP 1 More London Place London SE1 2AF Tel: Fax: ey.com Private and confidential The Board Brighton and Sussex University Hospitals NHS Trust Trust Headquarters Royal Sussex County Hospital Eastern Road Brighton BN2 5BE 31 July 2013 Dear Board members, Annual Audit Letter 2012/13 The purpose of this Annual Audit Letter is to communicate to the Board of Brighton and Sussex University Hospitals NHS Trust and external stakeholders, including members of the public, the key issues arising from our work, which we consider should be brought to their attention. We have already reported the detailed findings from our audit work to the Audit Committee in our 2012/13 Audit results report issued on 6 June I would like to take this opportunity to thank the employees of the Trust for their assistance during the course of our work. Yours faithfully Paul King For and behalf of Ernst & Young LLP Enc The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC and is a member firm of Ernst & Young Global Limited. A list of members' names is available for inspection at 1 More London Place, London SE1 2AF, the firm's principal place of business and registered office.

3 Contents Contents 1. Executive summary Key findings Control themes and observations... 7 In March 2010 the Audit Commission issued a revised version of the Statement of responsibilities of auditors and audited bodies ( Statement of responsibilities ). It is available from the Chief Executive of each audited body and via the Audit Commission s website. The Statement of responsibilities serves as the formal terms of engagement between the Audit Commission s appointed auditors and audited bodies. It summarises where the different responsibilities of auditors and audited bodies begin and end, and what is to be expected of the audited body in certain areas. The Standing Guidance serves as our terms of appointment as auditors appointed by the Audit Commission. The Standing Guidance sets out additional requirements that auditors must comply with, over and above those set out in the Code of Audit Practice 2010 (the Code) and statute, and covers matters of practice and procedure which are of a recurring nature. This Annual Audit Letter is prepared in the context of the Statement of responsibilities. It is addressed to the Members of the audited body, and is prepared for their sole use. We, as appointed auditor, take no responsibility to any third party. Our Complaints Procedure - If at any time you would like to discuss with us how our service to you could be improved, or if you are dissatisfied with the service you are receiving, you may take the issue up with your usual partner or director contact. If you prefer an alternative route, please contact Steve Varley, our Managing Partner, 1 More London Place, London SE1 2AF. We undertake to look into any complaint carefully and promptly and to do all we can to explain the position to you. Should you remain dissatisfied with any aspect of our service, you may of course take matters up with our professional institute. We can provide further information on how you may contact our professional institute. EY i

4 Executive summary 1. Executive summary 1.1 Responsibilities Our 2012/13 audit work has been undertaken in accordance with the Audit Plan that we issued on 11 March 2013 and is conducted in accordance with the Audit Commission s Code of Audit Practice, International Standards on Auditing (UK and Ireland) and other guidance issued by the Audit Commission. The Trust is responsible for preparing and publishing its statement of accounts, annual report and annual governance statement. It is also responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources. As auditors we are responsible for: Forming an opinion on your financial statements; Forming a conclusion on the arrangements that the Trust has in place to secure economy, efficiency and effectiveness in its use of resources; Reviewing, and reporting on as appropriate, other information published with the financial statements, including the annual governance statement, the annual report and the remuneration report; and Undertaking any other work specified by the Code of Audit Practice. 1.2 Summary of Results Summarised below are all elements of our work: Audit the financial statements of Brighton and Sussex University Hospitals NHS Trust for the financial year ended 31 March 2013 in accordance with International Standards on Auditing (UK & Ireland). Report to the Trust s on its summarisation schedules Report to the National Audit Office on the accuracy of summarisation schedules. Form a conclusion on the arrangements the Trust has made for securing economy, efficiency and effectiveness in its use of resources. Issue a report to those charged with governance of the Trust (the Audit Committee) communicating significant findings resulting from our audit. Consider the information published with the financial statements, including the Trust s annual governance statement and annual report. We identify any inconsistencies with other information of which we are aware from our work and consider whether it complies with guidance published by the Department for Health. Issue a report on the Quality Accounts of the Trust. Consider whether, in the public interest, we should make a report on any matter coming to our attention in the course of the audit. Determine whether any other action should be taken in relation to our responsibilities under the Audit Commission Act, including whether a referral to the Secretary of State should be made. Issue a certificate that we have completed the audit in accordance with the requirements of the Audit Commission Act 1998 and the Code of Practice issued by the Audit Commission. On 10 June 2013 we issued an unqualified audit opinion in respect of the Trust. On 10 June 2013 we issued an unqualified report on the Trust s summarisation schedules. We reported our findings to the National Audit Office on 10 June On 10 June 2013 we issued an unqualified value for money conclusion. On 6 June 2013 we issued our final report in respect of the Trust. On 10 June 2013 we issued our report. On 28 June 2013 we issued our report. No issues to report. No issues to report On 28 June 2013 we issued our audit completion certificate following the conclusion of the Quality Account audit EY 1

5 Executive summary 1.3 Audit fees We had set our planned fee at the scale fee published by the Audit Commission. We reported in our report to those charged with governance issued on 6 June 2013 that a number of the Trust s departments did not provide us with timely working papers and timely responses to our audit queries. We also spent additional time on the Trust s Annual Report and Quality Account. Consequently the final fee may increase subject to determination from the Audit Commission. Planned fee Scale fee Final Code audit work including: 124, ,569 TBC - as above Non-Code work EY 2

6 Key findings 2. Key findings 2.1 Financial statement audit We audited the Trust s Statement of Accounts in line with the Audit Commission s Code of Audit Practice, International Standards on Auditing (UK and Ireland) and other guidance issued by the Audit Commission and issued an unqualified audit report on 10 June The key findings from our audit are set out below. The significant risks are those included in our Audit Plan issued on 7 March Significant risk Achievement of planned financial surplus At the time of audit planning, the Trust was forecasting that it would meet its 2012/13 financial target of a 2.9 million surplus, although at the end of January 2013 it reported some 2 million of activity that the PCTs had not yet agreed to fund. Findings: In the 2012/13 financial statements the Trust reported a 3.3 million surplus for the year. During the audit, we reviewed year end processes around accounting for income, accruals and provisions, and in particular evidence to support additional income from the PCTs. Our audit work did not identify any indications of financial misreporting. Other financial statement risks Risk of misstatement due to fraud and error Management has the primary responsibility to prevent and detect fraud. It is important that management, with the oversight of those charged with governance, has put in place a culture of ethical behaviour and a strong control environment that both deters and prevents fraud. Our responsibility is to plan and perform audits to obtain reasonable assurance about whether the financial statements as a whole are free of material misstatements whether caused by error or fraud. As auditors, we approach each engagement with a questioning mind that accepts the possibility that a material misstatement due to fraud could occur, and design the appropriate procedures to consider such risk. Findings: Our planned audit work did not identify any significant issues that we need to report to you. Assurances for the first year EY audit - Audit findings and conclusions As this is the first year of the EY audit of the Trust, we sought specific assurance over the following significant accounting entries: Accounting treatment of the 3T s project: We reviewed the accounting treatment of the 3T s project, in particular its costs for 2012/13. PFI Scheme accounting entries: We reviewed the accounting model for the PFI Scheme and the accounting entries for 2012/13. Findings: Our planned audit work did not identify any issues that we need to report to you. Treatment of nil book value assets - Audit findings and conclusions Officers reviewed this as part of the preparation of the 2012/13 financial statements and wrote out million of assets. Findings: Our planned audit work did not identify any issues that we need to report to you. We also report on the following issues we found during our audit. Review of the Annual Report and the Remuneration Report We were provided with a full draft of the Trust s Annual Report, including the Remuneration Report on 3 June. This should have been available at the start of the audit on 22 April. Following our review we identified a number of areas where the narrative of the Annual Report should be amended so that it is consistent with the financial statements. The Trust should have a clear process for the timely approval of the Annual Report, in its revised Rules of Procedures, so that the: Board is satisfied that it meets both its own and the DH disclosure requirements The Annual Report is available for audit at the end of April each year. Balance and consistency of reporting in external reports. We found that the Trust s external reporting in its Annual Report and the Quality Account should be more EY 3

7 Key findings balanced and consistent on how the Trust has achieved its 2012/13 goals, the areas of underperformance and areas to develop during 2013/14. The Trust should review the quality of its external reporting in the Annual Report (including the Annual Governance Statement) and the Quality Account so that it adequately reflects how the Trust has achieved its 2012/13 goals, the areas of underperformance and areas to develop during 2013/14. Proper approval of exit packages The Terms of Reference of the Trust s Remuneration and Nominations Committee should be revised so that it reflects the requirement for the appropriate scrutiny of exit packages. 2.2 Value for money conclusion We are required to carry out sufficient and relevant work in order to conclude whether the Trust has put in place proper arrangements to secure economy, efficiency and effectiveness in the use of resources. In accordance with guidance issued by the Audit Commission, in 2012/13 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. We issued an unqualified value for money conclusion. The key findings from our audit are set out below. The significant risks are those included in our Audit Plan issued on 11 March Significant risk Financial resilience: Sustainability of the Trust s financial position The Trust has plans in place aiming to ensure that its long term finances are stable and support its strategic objectives. Long term finances and the ability to demonstrate financial health are critical to the Trust achieving Foundation Trust status. Findings The sustainability of the Trust s financial position is reliant on. a number of complex, interrelated factors. The Trust had another challenging financial year but delivered a 3.3 million surplus, higher than the planned 2.9 million surplus. The Trust is currently revising its ten year Long Term Financial Model (LTFM). Its LTFM takes account of reasonable growth assumptions and service plans and developments, including the 3 T s project, although this is currently being revised to reflect the 3T s funding options. The Trust recognises that it needs to deliver its 4% to 7 % challenging efficiency plans (some 70 million over 10 years) and develop robust downside scenario and mitigations plans. The Trust is planning to deliver a Financial Risk Rating (FRR) of 3 over the next three years and is aiming for a 4 in subsequent years, but will need to ensure that a 3 is deliverable should savings plans not be achieved. In terms of improving efficiency and productivity, the Trust delivered its surplus of 3.3 million and achieved a CIP (Cost Improvement Programme) of 32 million of savings in 2012/13 ( 20.5 million in 2011/12). The Trust s latest reference cost indicator (RCI) is (95.49 for 2011/12) which shows that the Trust is relatively efficient, as a trust with costs equal to the national average will score 100. The Trust recognises that the implementation and achievement of recurrent CIP will be a significant challenge for the Trust in 2013/14 and subsequent years. The Trust is currently modelling the worst case scenario in terms of adverse financial impacts in its Long Term Financial Plan, and developing a scale of operational, tactical and strategic mitigations that could be deployed. Other risks Delivery of economy, efficiency and effectiveness - Embedding effective governance as part of the Trust s journey to FT status The Trust is undergoing strategic change, whilst generally sustaining service performance in a challenging environment. Governance arrangements have become more embedded, through the Board s sub-committees and engagement with senior clinicians, although further developments are required particularly in strengthening accountability and the EY 4

8 Key findings board assurance framework. Findings We found that the Trust is critically reviewing its governance arrangements recognising that key improvements, such as a proper board development programme and an effective Board Assurance Framework, are both required for a high performing organisation and as part of the Trust s preparation for FT Status. An external consultant is reporting on findings in June 2013 on how the Trust can further improve its governance of major programmes around the 3T s, ESR and EPR. We have looked at the effectiveness of the board committee reporting and have concluded that the Finance and Workforce Committee has the clearest work programme and the most effective board reporting. The Safety & Quality Committee (S&Q) needs more clarity on a work programme and reporting for it to effectively provide its board assurance role. Their needs to be proper outcome measures for monitoring quality on a monthly basis, which should include those annual measures in the Trust s Quality Report. The Trust recognises the issues around the assurances provided by the S&Q Committee and are currently reviewing the Trust s arrangements to improve governance. A new trust Quality & Risk Committee will replace the S&Q Committee from July The Trust has yet to agree a revised trajectory with the Trust Development Authority. The Trust plans to concentrate on Organisational Development and Governance during 2013/14; the Monitor process in 2014/15 with an FT Authorisation start date of 1 April 2015 however this has yet to be formally agreed as it is out of the DH timeline of all trusts to be FTs by 1 April Annual governance statement We are required to consider the completeness of disclosures in the Trust s annual governance statement, identify any inconsistencies with the other information of which we are aware from our work, and consider whether it complies with Department of Health guidance. The final annual governance statements complied with DH guidance. We have discussed above how the Trust should review the quality of its external reporting in the Annual Report (including the Annual Governance Statement) so that it adequately reflects how the Trust has achieved its goals, the areas of underperformance and areas to develop next year. 2.4 Quality Accounts We issued our report on the Trust s Quality Account on 28 June We qualified one of the two mandated indicators we tested as the Trust did not collect the data in accordance with the national guidelines. We found that the Trust s external reporting in its Quality Account should be more balanced and consistent on how the Trust has achieved its 2012/13 goals, the areas of underperformance and areas to develop during 2013/ Payments by Results (PbR) Data Assurance Framework The Audit Commission appointed Capita to manage and deliver the 2012/13 PbR assurance programme. The PbR data assurance framework requires this work to be summarised in our Annual Audit Letter. This work is performed by Capital Business Services Limited and not under the direction and supervision of EY. We do not accept responsibility to the Trust nor to any third party for the work undertaken or summary findings below.. For the 2012/13 PbR data assurance programme reporting on local work for NHS Sussex PCT cluster comprised a single report covering all work undertaken on behalf of that cluster. The summary findings for each area below are taken from the Report on the local audit programme for Brighton and Sussex University Hospitals NHS Trust issued by Capita, dated June 2013 (revised), which is an extract of the cluster report and covers all audit work undertaken at the Trust. Area 1: Midwifery in admitted patient care In the sample audited, the Trust had 8.8 per cent of spells (three spells) with an error that affected the price. The performance of the Trust, measured against the number of spells with an incorrect payment, would place the Trust in the worse than average but not in the worst 25 per cent of trusts compared to last year s national performance. EY 5

9 Key findings The two high priority recommendations made were to: address the lack of accurate information contained in antenatal pro formas; and, resolve the cause of four sets of patient records being unsafe to audit. Area 2: Paediatrics in admitted patient care In the sample audited, the Trust had 6.1 per cent of spells (three spells) with an error that affected the price. The performance of the Trust, measured against the number of spells with an incorrect payment, would place the Trust better than average, but not in the top 25 per cent of trusts compared to last year s national performance. The Trust is recommended to train coders to adhere to national coding standards, particularly the use of codes that apply in the perinatal period (chapter P codes). Area 3: Obstetrics in outpatient attendances In the sample audited, the Trust had 17.3 per cent of attendances with an error that affected the price. The two high prority recommendations made were to identify the cause of omitted of scans in outpatient midwifery; reduce the number of omissions and audit again to ensure the problem has been corrected; and, update the pro formas used to code obstetrics in outpatients in conjunction with the coding department to bring the forms up to date with national coding standards. Area 4: Electrocardiography in outpatients In the sample audited, the Trust had 6.3 per cent of attendances with an error that affected the price. Based on the audit completed we have made two recommendations to the Trust, which have been included in an action plan completed by the trust. The high priority recommendations are: review the recording of electrocardiography in outpatient cardiology, including the use of the tick lists; coding of scans related to cardiac physiology appointments; and, correct the cause of age on attendance errors within PAS. All the recommendations were included in an action plan agreed by the Trust, and have either been completed or have an implementation date by the end of Department of Health group instructions We reported to the National Audit office (NAO) on 10 June 2013 the outcomes of our review of your summarisation schedules conducted under the departmental account group instructions issued by the NAO in December We did not identify any areas of concern. EY 6

10 Control themes and observations 3. Control themes and observations As part of our audit of the financial statements, we obtained an understanding of internal control sufficient to plan our audit and determine the nature, timing and extent of testing performed. Although our audit was not designed to express an opinion on the effectiveness of internal of internal control we communicated to those charged with governance at the Trust, as required, significant deficiencies in internal control. The matters reported are shown below and are limited to those deficiencies that we identified during the audit and that we concluded are of sufficient importance to merit being reported to the Board. Description Tighter control is required over consumables stock, which is not on the MAT MAN (materials management) system, so that the Trust has sufficient assurance that stock accounting is well managed. Impact Tighter control over the accounting for non MAT MAN stock will give management greater assurance over the accuracy of the stock valuation in the Trust s financial statements which is a material figure. EY 7

11 Ernst & Young LLP Assurance Tax Transaction Advisory The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC and is a member firm of Ernst & Young Global Limited Ernst & Young LLP, 1 More London Place, London, SE1 2AF. Ernst & Young LLP Published in the UK. All rights reserved.