/KPCT-11-109_Minutes_of_Audit_Co

NHS KIRKLEES

Minutes of the Audit Committee held on Wednesday 11 May 2011 at 9.30am in the Stewart Room, Broad Lea House, Bradley Business Park Present: Tony Gerrard Valerie Aguirregoicoa Mehboob Khan

Non-executive Director and Chair Non-executive Director Non-executive Director

In attendance: Steve Brennan Paul Lundy Richard Walker Helen Jones Liz O’Reilly Janice Boucher Alison Fearnley Rosie Cook

Deputy Director of Finance District Auditor Audit Manager Internal Audit Manager Local Counter Fraud Specialist Finance and Performance Lead – KCHS Corporate Governance Administrator Acting Head of Communications (Agenda item AC/11/41)

AC/11/19

Apologies for absence Apologies for absence were received from Helena Corder, Director of Corporate Services and Nigel Bell, Head of Internal Audit.

AC/11/20

Minutes of the last meeting held on 2 February 2011 The minutes of the Audit Committee meeting held on the Wednesday 11 February 2011 were AGREED as a true and accurate record.

Kirklees Community Healthcare Services (KCHS) – Provider Agenda AC/11/21

Matters arising AC/11/04

Internal Audit Progress Report

Tough Books Janice provided a verbal update confirming that progress had been made to resolve many of the underlying issues reported in the Internal Audit report. Janice AGREED to continue to provide the Audit Committee with regular verbal updates on the outstanding issues.

Janice confirmed that a cost benefit analysis existed for the Tough Book project and AGREED to share this with Helen Jones, but acknowledged that the message had not been effectively communicated to the front line, and this was an area for further improvement.

AC/11/06

Minutes of the KCHS Governance Committee

Janice advised that she was still to liaise with Helena regarding the mirroring of the policy databases.

It was confirmed that Rob Millington had been appointed as a Nonexecutive Director on the TCS Executive Board following comments raised at the last meeting.

AC/11/22

KCHS Internal Audit Progress Report Helen Jones presented the KCHS Internal Audit report to the Audit Committee. She advised the meeting that a total of 130 days had been provided against the agreed plan as at 3 May 2011. This represents 110% of the plan.

It was noted that since the last Audit Committee meeting two further audit reports had been finalised. These included: Budgetary Control and Financial Management Patient Experience Helen provided a brief overview of the key findings. In particular the following points were highlighted: Budgetary Control It was noted that the review provided ‘Significant Assurance’. There were no major concerns highlighted. The report contained three recommendations and an action plan had been agreed with management to address these.

Patient Experience It was noted that no formal audit opinion was necessary in respect of this review. It was noted that KCHS had made a number of positive steps towards developing an effective structure for collating and using information on patient experience. However areas of better practice have been identified which KCHS have agreed to take forward. The Audit Committee reviewed the detailed findings, recommendations and agreed action plan.

It was highlighted that responsibility for the majority of these actions fell upon the Head of Integrated Governance and Quality. Valerie therefore enquired what other back up there was in terms of implementing these.

It was recognised that further work was needed in terms of prioritising these actions. In addition it was also pointed out that the proposed timescales were unrealistic given the implementation of Locala.

Mehboob Khan suggested delaying this work in view of the transition arrangements as there may be different ways of using patient experience that are more tried and tested in the future. In addition it was also emphasised that consultation with key partner organisations was crucial.

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It was noted that a Best Practice Briefing was due to be published at the end of June. It was therefore AGREED that a further update would be provided following the release of this document.

The Audit Committee RECEIVED and NOTED the KCHS Internal Audit Progress Report.

AC/11/23

KCHS Draft Internal Audit Plan 2011/12 Helen Jones presented the proposed annual audit plan for KCHS for 2011/2012 for approval by the Audit Committee. She explained that operational areas of the plan were still to be agreed for the coming year and that extra resources had been identified outside of the plan to support the implementation of Locala.

Valerie enquired who had been consulted on developing the plan.

Janice provided assurance that the plan had been approved by the KCHS Board via Janice. Valerie suggested it would be useful to include an additional audit around capabilities. Janice confirmed that it had been identified that further worked was needed to improve commercial and procurement skills across middle management and confirmed that a business toolkit was being developed to address this. It was therefore AGREED that Internal Audit would review this plan to assess if this would address the issues highlighted.

The Audit Committee APPROVED the Draft 2011/12 KCHS Internal Audit Plan.

AC/11/24

KCHS Statement of Internal Control (SIC) Janice Boucher presented the KCHS 2010/11 Statement of Internal Control to the Audit Committee for comment. It was noted that the SIC sets out KCHS systems and processes for risk management and internal control but highlights some control lapses. These include: Waiting time breaches within Community Occupational Therapy, Podiatry and Vasectomy Two data security incidents in 2010/11 Tony Gerrard pointed out that the Audit Committee was yet to review its effectiveness this year.

It was noted that some reference should be made to the NHS Kirklees SIC within the document.

Valerie asked for patients’ complaints to be included in the second paragraph concerning clinical risk. In addition she requested that any reference to Equality and Diversity is brought together and not split up.

The Audit Committee RECEIVED and NOTED the content of the 2010/11 SIC. Page 3 of 14

AC/11/25

KCHS Waiver of Standing Financial Instructions (SFIs) - Purchase of spare batteries and car chargers for Panasonic Toughbooks The Audit Committee noted the action taken to waive Standing Financial Instructions to purchase spare batteries and car chargers for Panasonic Toughbooks.

It was noted that only BT could supply the additional items therefore the proposal was supported by the PCT’s Head of IT. Mehboob Khan enquired whether there was a requirement to purchase another piece of kit for charging a second battery. Janice AGREED to make additional enquiries regarding this.

Tony asked how the contract had been designed and whether there was any learning from this procurement exercise. Janice AGREED to check on how it was constructed and whether there was a better way of doing this.

Request from KCHS to waive SFI for Procurement of Financial System for Locala Community Partnerships Further to the above, an additional request was submitted from KCHS to waive Standing Financial Instructions for Procurement of a financial system for Locala Community Partnerships. Janice explained that in order to meet challenging timelines for the Go Live date of 1 October 2011 it is necessary to request the waiver of SFIs in relation to the procurement of a financial system given that early pricing now suggests that the hosted service would be above the £50k threshold.

Janice provided assurance that Internal Audit had been involved in the process and that there was a clear specification in place. In addition it was noted that a decision needed to be made by the end of May to ensure a system is in place by the 1 October 2011.

The Audit Committee APPROVED the request to waive SFIs for procurement of a Financial System for Locala Community Partnerships.

AC/11/26

Minutes of the KCHS Finance, Performance and Business Development Committee The Audit Committee RECEIVED and NOTED the minutes of the KCHS Finance, Performance and Business Development Committee held on 21 December 2010, 20 January, 17 February and 24 March 2011.

The Audit Committee enquired what the outturn position on CIPs was.

Janice confirmed that overall KCHS exceeded the target on Non-Pay but had struggled with District Nurse Clinical Contact time and Travel.

Tony Gerrard enquired about sustainability for the year. Janice advised there was still significant variation across the patch confirming there was a £600k gap at present but she was not unduly concerned at this stage.

It was noted that any issues would be fed back via the TCS Transformational Board.

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Tony requested an update on the achievement of CQUIN Indicators. It was noted that KCHS achieved 79% of the financial value. It is estimated that KCHS will achieve 80% this year however targets had not been issued to date therefore it was difficult to estimate.

A discussion ensued regarding the draft budgets which had not been completed by April. Valerie enquired how KCHS knew if they were on target to achieve a balanced budget given the budgets had still not been formally agreed. She also asked what KCHS’ Board’s reaction was to this. Janice acknowledged that this was not an ideal position to be in and explained that there were resource issues in terms of recruiting key finance staff. Janice provided assurance that work was ongoing to prioritise and manage the risks via a sensible route and that any underlying issues would be reported via the TCS Transformational Board.

Tony Gerrard AGREED to liaise with Rob Millington to find out what scrutiny is being applied through the TSC Transformational Board.

AC/11/27

Minutes of the KCHS Governance Committee The Audit Committee RECEIVED and NOTED the minutes of the KCHS Governance Committee held on 17 December 2010.

NHS Kirklees (Commissioning) Agenda AC/11/28

Matters Arising AC/10/105

NHSK Internal Audit Progress Report

QOF 5% Validation Check Tony reported that Mark Jenkins had sent him an email regarding the outstanding issue. Tony was yet to follow this up.

AC/11/08

NHSK Internal Audit Progress Report

Holme Valley Memorial Hospital Tony and Bryan had met with Internal Audit to discuss how to address this and agreed a way forward. It was noted that Helen Jones was waiting a for a Gateway report to be published before this could be followed up. Steve Brennan was to liaise with Helen regarding the Gateway report.

AC/11/29

Quality Assurance processes through Transition This item was deferred.

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AC/11/30

Transforming Community Services: Programme Governance and Structure This item was deferred. Tony was to meet with Jim Barwick to discuss this report outside of this meeting. Tony confirmed however that a robust process appeared to be in place.

AC/11/31

NHS Kirklees Internal Audit Progress Report Helen Jones presented the NHS Kirklees Internal Audit Report to the Audit Committee. She advised the meeting that a total of 304 days had been provided against the agreed plan as at 3 May 2011. This represented 95% of the plan, a slight underspend in the number of planned audit days (319).

It was noted that since the last Audit Committee meeting a further six audit reports had been finalised. These included: Equality of Care Budgetary Control Payment of Non PO Invoices IT Disaster Recovery Payroll Financial Ledger Helen provided a brief overview of the key findings. In particular the following points were highlighted: Equality of Care It was noted that overall the review had provided a limited level of assurance. In particular it was found that NHS Kirklees is in the early stages of establishing whether the amount of resources invested is achieving the desired outcomes. It was also found that although NHS Kirklees has a wealth of information it is in the developmental stages of using this to manage inequality of healthcare offered by GPs. A discussion ensued regarding the future of reducing health inequalities and engaging with stakeholders as part of a wider system. It was recognised that GPs should have a greater influence in our area which would be flagged up via GP Consortia development. In addition it was also suggested it would be useful for the Trust Board to receive a decision summary from the Health and Well Being Board when this is fully established.

Budgetary Control and Financial Management It was noted that this audit had received ‘Significant Assurance’. Overall the controls relating to the management and control of budgets were found to be satisfactory. A small number of inconsistencies in the application of these controls had resulted in a Significant Assurance opinion as opposed to a Full Assurance opinion.

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The review confirmed that four of the five recommendations made in the 2009/10 report had been implemented.

The main finding related to the authorisation of virements.

The report contained one recommendation that related to the above. An action plan has been agreed with management to address this.

Payment of Non PO Invoices It was noted that the review had provided a significant level of assurance that goods and services procured by the PCT via the Non PO route are valid. It was recognised that 95% of invoices had been paid in accordance with the Public Sector Payments Policy.

The report contained one recommendation. This will provide additional assurance on the accuracy of coding and compliance with the Public Sector Payment Policy. It was noted that an action plan had been agreed with management to address this.

Payroll It was noted that the review had provided ‘Significant Assurance’. The review found that: Changes to standard data were correctly processed Satisfactory controls were in place to ensure that contracts were drawn up and signed in a timely manner Workforce information such as sickness trends, maternity and staff turnover are provided to the Governance Committee on a regular basis.

The report contained three recommendations that related to the issues listed in the key findings section. It was recognised that an action plan had been agreed with management to address these.

Financial Ledger It was noted that the review had provided ‘Significant Assurance’.

Overall the controls relating to the general ledger were found to be satisfactory to ensure that the data in the ledger is accurate and timely and that reliance can be placed upon the information reported from the system.

The main findings related to: The timeliness of the completion of the control reconciliations and independent review The security of cells on the spreadsheet used to reconcile the ledger.

The report contained two recommendations that related to the issues listed in the key findings section. It was recognised that an action plan had been agreed with management to address these.

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IT Disaster Recovery Follow up It was noted that overall the review had provided a limited level of assurance and that NHS Kirklees has made limited progress in developing IT Disaster Recovery arrangements. In particular it was highlighted that four of the five agreed recommendations had not been implemented from 2009/10.

It was noted that the Director of Performance and Information was disappointed that the agreed recommendations had not been progressed as quickly as they should have been. The Audit Committee requested reassurance that progress in developing the IT Disaster Recovery arrangements were being reprioritised to address this issue.

It was therefore AGREED to request a further report from the Director of Performance and Information on progress with the implementation of the agreed recommendations and what is within easy control.

Richard Walker suggested that reference to the emergency plan should be reflected within the Statement of Internal Control.

Finally the Audit Committee requested feedback from Internal Audit on the review of the IG Toolkit at the next meeting The Audit Committee RECEIVED and NOTED the NHS Kirklees Internal Audit Progress Report.

AC/11/32

NHS Kirklees Annual Report and Head of Audit Opinion Helen Jones presented the Internal Audit Annual Report and Head of Internal Audit Opinion for 2010/11 for NHS Kirklees. She explained that the Annual Report provided a summary of the Internal Audit work completed during 2010/11 and audit opinion provided. In addition it was noted that the Head of Audit Opinion provided Significant Assurance.

In particular it was recognised that the Assurance Framework was now well embedded within the organisation.

The Audit Committee RECEIVED and NOTED the 2010/11 Internal Audit Annual Report and Head of Audit Opinion.

AC/11/33

NHS Kirklees Draft Internal Audit Plan 2011/12 Helen Jones presented the Draft 2011/12 Internal Audit Plan to the Audit Committee. She explained that the report provided details of the proposed audit coverage for 2011/12 and associated number of audit days.

It was noted that there was a reduction in the number of proposed days from 2010/11 from 319 to 295 due to significant assurance of the financial controls.

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Valerie asked if work on equality assessment could also be linked to compliance with the Human Rights Act. The Committee expressed disappointment that the proposed plan had not been discussed with Non-Executive Directors prior to being presented to the Audit Committee. It was therefore AGREED this would be discussed in more detail at the next Non-Executive Directors meeting on 16 May 2011 and that any comments would be fed back to Helen Jones.

The Audit Committee AGREED the Draft 2011/12 Audit Plan subject to any additional comments being fed back from the Non-Executive Directors meeting.

AC/11/34

Internal Audit Charter Helen Jones presented the Internal Audit Charter to the Audit Committee for information. It was noted that a requirement of Internal Audit Standards is to have an Internal Audit Charter which WYAC has developed to underpin the processes at NHS Kirklees.

The Audit Committee acknowledged that the Charter formally defines the purpose, authority and responsibility of Internal Audit and RECEIVED and NOTED the Charter.

AC/11/35

Counter Fraud Progress Report – May 2011 Liz O’Reilly presented the Local Counter Fraud Progress report to the Audit Committee and summarised the work performed since the last meeting. In particular the following points were highlighted: Preventing Fraud Liaison with UK Boarder Agency regarding a patient from abroad accessing NHS secondary care. It was noted this was a new ruling and that only one enquiry had been received to date but this was likely to increase. It was not clear however how this was being policed.

No information on new or closed cases was circulated to the Audit Committee on this occasion.

The Audit Committee RECEIVED and NOTED the May Counter Fraud Progress Report.

AC/11/36

2010/11 Annual Report of Counter Fraud Work Liz O’Reilly presented the 2010/11 Annual Report of Counter Fraud Work to the Audit Committee for approval. Liz explained that the report detailed the fraud activity conducted during 2010/11 and requested that the Audit Committee approve this prior to submission to the Department of Health. In addition it was highlighted that the report was linked to the evidence provided in the annual Qualitative Assessment declaration.

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The Audit Committee APPROVED the 2010/11 Counter Fraud Annual Report.

AC/11/37

2011/12 Counter Fraud Risk Assessment The Audit Committee reviewed the 2011/12 Counter Fraud Risk Assessment report. Liz explained that the report uses a variety of local and national sources to determine the high risk fraud issues for the Trust to consider during 2011/12. It was noted that the document also considers previous year’s fraud activity, Internal Audit Reports and Fraud Alerts.

The Audit Committee acknowledged that the high risk fraud areas had been identified and used to inform the Key Framework of Duties for 2011/12.

The Audit Committee RECEIVED and NOTED the Counter Fraud Risk Assessment for 2011/12.

AC/11/38

Counter Fraud Key Framework of Duties 2011/12 Liz O’Reilly presented the 2011/12 Counter Fraud Key Framework of Duties to the Audit Committee for approval. She explained that the document sets out the planned counter fraud work to be undertaken by the Local Counter Fraud Specialist during 2011/12.

In particular counter fraud work for 2011/12 would focus on the following areas: GPs, Dentists and Pharmacists Managers/supervisors Human Resources Tony Gerrard advised the Audit Committee he would be discussing the number of recommended local counter fraud days in comparison with other PCTs with the Cluster Director of Finance.

The Audit Committee reviewed the document and AGREED this as the counter fraud strategy for 2011/12.

AC/11/39

External Audit Progress Report and Briefing – May 2011 Richard Walker presented the External Audit Progress Report to the Audit Committee for information. He explained that the report updates on progress in relation to 2010/11 external audit work covering the following: The financial statement audit The Value for Money conclusion Work carried out under the PBR Assurance Framework Page 10 of 14

In particular the following points were highlighted concerning the above: Financial statements audit It was noted that interim audit work which focuses on the effectiveness of the PCT’s control environment and the key controls in the fundamental systems was completed in April. Richard confirmed that draft accounts had been received in line with the Department of Health’s deadline and that work would be carried out during May and early June in order to give their opinion by 10 June.

Value for money conclusion work Richard explained that the main focus of their work was around a review of the PCT’s arrangements to deliver the QIPP programme and required management cost reductions. It was recognised that the QIPP programme for 2011/12 was currently sized at £13.3m in order to support delivery of the required control total. Richard confirmed that governance arrangements were strong around QIPP but the programme remained challenging and the PCT would need to remain focused on it.

The Audit Committee acknowledged that there were additional risks around pressures faced by Mid Yorkshire Hospitals NHS Trust (MYHT) that may challenge NHS Kirklees’ financial position.

2010/11 Payment by Results Data Assurance Framework The Audit Committee acknowledged that the reference cost review at Calderdale and Huddersfield Foundation Trust had now been completed and reported. It was noted that a summary of the findings would be available on the Audit Commission’s website and in the PCT’s annual audit letter.

In addition it was also highlighted that results of both inpatient and outpatient reviews undertaken at MYHT were more positive than previous years.

Finally it was noted that a review of the PCT’s arrangements for securing good quality data from its providers rated the PCT’s arrangements at a level 3 (performing strongly). A second phase of work would be undertaken later in the year.

The Audit Committee RECEIVED and NOTED the External Audit Progress Report and Briefing.

AC/11/40

Audit Fee Letter 2011/12 The Audit Committee was presented with the 2011/12 Audit Fee Letter which sets out the fee to be charged for the 2011/12 external audit and outlines the main areas of work to be covered by the fee.

It was noted that the audit fee amounted to £206,000 and that a separate audit plan would be issued in November 2011 which would underpin this work fee.

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The Audit Committee RECEIVED and NOTED the annual audit fee for 2011/12.

AC/11/41

NHS Kirklees Draft Annual Report 2010/11 Rosie Cook, Acting Head of Communications, joined the meeting to present the first draft of the 2010/11 Annual Report for the Audit Committee to comment on.

It was highlighted that the report follows the same format as last year and would be sent for design following approval of the text. The Chair and Chief Executive will approve designs late May and final proofs would be ready by 28 June 2011.

The Audit Committee reviewed the content of the report and suggested some minor amendments which Rosie AGREED to adjust.

AC/11/42

2010/11 Draft Accounts Steve Brennan presented the 2010/11 draft Annual Accounts to the Audit Committee. He explained that the draft accounts had been completed and submitted on 20 April 2011 in accordance with Department of Health deadlines and were now subject to audit due to commence on 17 May 2011.

It was noted that the final audited version of the accounts would be presented back to the Audit Committee on 8 June 2011so that the Committee can recommend their approval to the Board, in line with the PCT’s Standing Orders. In addition External Audit’s governance report and draft audit letter would also be tabled.

It was acknowledged that the deadline for submitting audited accounts to the Department of Health was 10 June 2011.

Steve provided a comprehensive overview of the main accounting changes and the Audit Committee was given the opportunity to raise any questions.

It was highlighted that the numbering in Note 20 was incorrect.

The Audit Committee RECEIVED and NOTED the 2010/11 draft Annual Accounts.

AC/11/43

2010/11 Draft Letter of Representation The Audit Committee RECEIVED and NOTED the 2010/11 Draft Letter of Representation for information. It was noted that this would be updated as necessary as the audit of the accounts progresses.

The Audit Committee acknowledged that the final version of the letter would be presented to the June Audit Committee along with the final audited accounts.

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Paul Lundy confirmed that the letter would need to be dated 8 June 2011.

AC/11/44

Statement of Internal Control (SIC) The Audit Committee reviewed the Draft Statement of Internal Control.

It was noted that for 2010/11 there were some changes from the 2009/10 SIC. In addition it was recognised that the NHS Kirklees SIC is informed by the SIC produced by the provider Kirklees Community Healthcare Services and that this should be referenced within the SIC. Following discussion a small number of amendments were suggested which Steve AGREED to feedback to Helena Corder on her return from leave.

It was noted that the final Statement of Internal Control would be presented back to the Audit Committee on 8 June 2011 with the Annual Accounts.

The Audit Committee APPROVED the Draft Statement of Internal Control subject to the suggested amendments.

AC/11/45

2010/11 Losses and Compensations Register Steve Brennan presented the 2010/11 Losses and Compensations Register to the Audit Committee. He explained that there had been four compensation claims totalling £36k in year and that the register included the debts approved for write off by the Audit Committee in February of £6k. In addition there were a number of other losses detailed in the report.

Steve was ASKED to provide a summary of the compensation claims to the next Audit Committee.

Steve provided clarity on what counted towards a loss and compensation claim. It was AGREED that Janice and Steve would meet to ensure that all KCHS incidents are being fed through. Steve would also liaise with Terry Service, Assistant Director of Corporate Services and Risk, to double check the incidents reported.

The Audit Committee RECEIVED and NOTED the 2010/11 Losses and Compensation Register in accordance with the PCT’s Standing Financial Instructions.

AC/11/46

Extension of Audit Appointment The Audit Committee NOTED that Paul Lundy has had his appointment as District Auditor extended to seven years. It was noted that the main rationale for the extension was to avoid a loss of continuity at a time of major change for the organisations they audit and for the Commission itself.

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AC/11/47

Minutes of the Finance, Performance and Strategy Committee The Audit Committee RECEIVED and NOTED the minutes of the Finance, Performance and Strategy Committee held on 19 January and 16 February 2011.

AC/11/48

Minutes of the Governance Committee The Audit Committee RECEIVED and NOTED the minutes of the Governance Committee held on 19 January 2011 as well as an overview of the work undertaken by the Governance Committee between January and March 2011.

AC/11/49

Any other business There were no items of any other urgent business.

AC/11/50

Date and time of next meeting It was AGREED that the next meeting of the NHS Kirklees Audit Committee would take place between 9.30am and 12.00pm on Wednesday 8 June 2011 in the Stewart Room at Broad Lea House.

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