Item 8.6 for 21 Feb 2012 Audit Cttee Minute 13 Sep 2011
APPROVED
NHS Grampian (NHSG)
Minute of the Audit Committee Meeting
Tuesday 13 September 2011, 1000-1200
Conference Room, Summerfield House
Present
Mr David Anderson, Non-Executive Director, NHSG (Acting Chair)
Mr Terry Mackie, Non-Executive Director, NHSG
Mr Charles Muir, Non-Executive Director, NHSG
Mrs Christine Lester, Non-Executive Director, NHSG
In Attendance
Cllr Bill Howatson, Interim Chairman, NHSG
Mr Richard Carey, Chief Executive, NHSG
Mr Alan Gray, Director of Finance, NHSG
Mr Garry Kidd, Interim Assistant Director of Finance, NHSG
Mr Stuart Sands, Senior Audit Manager, PricewaterhouseCoopers LLP (PWC)
Mr Matthew Swann, PricewaterhouseCoopers LLP (PWC)
Ms Julie Lawrence, PricewaterhouseCoopers LLP (PWC)
Ms Helen Cobb, Audit Scotland
Anne-Marie Meconi, Minuting
Item / Subject / Action1 / Apologies and Welcome
Mr Anderson welcomed Mr Alan Gray as the new Finance Director and Mr Matthew Swann, from PWC, who would be taking over from Mr Stuart Sands.
Apologies were received from:
Mr Gordon Stephen, Employee Director, NHSG
Mrs Linda Porter, Senior Audit Manager, Audit Scotland
Mr Mark White, Director, PricewaterhouseCoopers LLP PWC
2 / Declaration of Interest
None.
3 / Minute of Meeting held on 24 June 11
The Minute of the meeting held on 24 June 2011 was approved.
4 / Matters Arising
4.1 / Action Log of 24 June 2011
The Committee reviewed the action log from the previous meeting and noted the following:
Information Management - Best Value Review of Resources: Mr Sands explained that PWC have assessed the arrangements that exist within NHSG against the recommendations in the Audit Scotland report. A paper is currently being drafted for review by the Director of Finance. This will be available for the December Committee meeting.
Voluntary Severance (VS): Mr Sands reported that arrangements are now in place to ensure continued reporting to the Board on the implementation of Voluntary Severance arrangements including actual versus planned delivery of financial benefits. The Committee agreed that this action is now complete.
Dental Income: Mr Kidd reported that the required management action plan is now agreed. The Committee agreed that this action is now complete.
Operational Scheme of Delegation: Mr Kidd reported that colleagues within the eHealth Directorate have now started work on the redevelopment of the database. When this is complete a full data cleansing exercise will be undertaken including the allocation of revised authority levels in liaison with operational managers. Mr Kidd to provide an update on progress at the December meeting.
Health and Safety Report: Mr Sands reported that the Chief Operating Officer (Dr Pauline Strachan) has assumed responsibility for delivery of the agreed action plan. Updates on progress will be provided to the Audit Committee through the high priority follow-up reporting mechanism.
Fraud Arrangements: Mr Kidd reported that the required management action plan is now agreed. The Committee agreed that this action is now complete.
PMS Post Implementation Review: Mr Sands reported that he has remained in close contact with Alison Hawkins (eHealth General Manager) on this issue. Whilst the current focus is on securing ‘business as usual’ status, arrangements are on target for the implementation of the next phases timetabled for February 2012 (Mental Health) and June 2012 (Order Communications). Mr Carey reported that the eHealth Committee, chaired by Kate Dean (Non-Executive Director), is monitoring performance of the remaining phases of PMS in very close detail. PWC to continue to liaise closely with Mrs Hawkins, General Manager for eHealth and bring a formal update on progress to the December 2011 meeting. Mr Sands confirmed that the next update will also include relevant points from PWCs experience of PMS implementation in other Boards.
Mr Carey also reported that he is arranging for a full update on PMS implementation to be scheduled for a future Board Seminar (January 2012).
Risk Management: Mr Carey reported that the risk reporting arrangements to the Board including the effectiveness of risk mitigation measures is being considered by the Executive Team. Mr Carey and Mr Gray will review the outcome of this discussion and make recommendations on future arrangements to a future Board Seminar (March 2012).
Patients Private Funds: Mr Kidd reported that he has reviewed the current guidance and there is no reason why NHSG cannot consider banking arrangements that would manage patients’ funds in an interest bearing account. Existing arrangements are varied however with different banks providers servicing different hospital locations. Mr Kidd to develop recommendations for a managed migration to interest bearing banking arrangements for consideration by the Operational Management Team, targeting a 1 April 2012 implementation. / PWC
GK
PWC
PWC
RC/AG
GK
5 / Internal Audit
5.1 / Revised Internal Audit Classifications
Mr Swann explained that the report summarised proposed changes to the risk ratings that will apply to all internal audit reports effective from 1 April 2011. The revised approach introduces a more objective formula assessment of the overall report rating based on the number of critical, high, medium and low classified recommendations. The report included an analysis of how the 2010/11 audit programme would have been rated under the revised scoring arrangements.
Mr Kidd highlighted his concerns that this methodology had not been discussed with NHSG prior to implementation and although the approach does not change the rating of individual recommendations it could as the report highlighted increase the severity of the overall report rating, compared to the existing methodology.
Mr Carey sought assurances that the risk rating that was being proposed was consistent with that applied in other NHS Boards. Mr Sands confirmed that the new terminology had been introduced UK-wide by PWC and applied by PWC to their other health clients. The rating methodology however does vary across NHS Scotland and Mr Sands agreed to raise this at the next Corporate Governance and Audit Group and to report back to the Audit Committee on the rating methodologies applied to internal audit reports in other NHS Boards in Scotland.
Cllr Howatson stated that the use of the word Critical can potentially be taken out of context and asked what response PWC had had from other Boards to implementation of the new terminology. Mr Sands stated that his understanding was that NHSG’s concerns were shared by other Boards.
Mr Gray and Mr Kidd to meet with PWC to review the new ratings and PWC to provide an update to the December meeting on the implications to NHS Grampian and how the proposed methodology compared to other Boards. The Committee therefore deferred making a final decision on the proposed change in rating methodology until the December meeting / PWC
GK/AG/PWC
5.2 / Progress Report
Mr Sands highlighted the following matters:
IT General Controls
The fieldwork is now complete and the final report is expected to be available for the December meeting.
PWC to include IT General Controls Report in the update for the December meeting.
Property Transaction Monitoring –
The SGHD Property Transactions Handbook requires that there is annual internal audit for completed transactions and the report arising from the audit be approved by the Audit Committee prior to submission to SGHD by 31 October 2011. Due to the extent of the current asset programme the NHSG property team have been unable to compile the required information to allow this work to be completed in time for a report to be available for this meeting. The information will be available at the end of September and approval was sought for the Committee to receive and approve the report between meetings.
PWC to circulate their report to the Committee for consideration and comment to meet the 31 October 2011 deadline.
Mid-Staffordshire Review
The final report will be available for the December Audit Committee. Helen Robbins, Clinical Governance and Risk manager is to arrange for this to be discussed at the December Board meeting, alongside the Board’s own report on progress against the action plan developed in response to the issues raised by the Mid-Staffordshire.
PWC to finalise report with the Director of Nursing and include with Mid-Staffordshire Monitoring Report for the December Board meeting.
Consultant Contract and Scottish Medical Training
Work is now complete and draft reports will shortly be issued for management comment.
In relation to Scottish Medical Training the Committee expressed the importance of ensuring that the report clearly identifies those issues which can only be resolved nationally (and over which NHSG has no direct control) and those matters which NHS Grampian can address locally.
In respect of the consultant contract review, the Committee sought assurance that PWC were working closely with the Medical Director in terms of agreeing the report and finalising the management action. Mr Sands confirmed that an initial discussion had been held with the Medical Director at the conclusion of the fieldwork and that a further meeting would be held to discuss the draft report.
PWC to progress to finalise both reports.
Liaison with External Audit
Mr Sands informed the Committee that he has made contact with the Boards new external auditors Deloitte LLP in order to ensure that there is no duplication of effort between the two audit programmes.
PWC and Deloitte to update the Committee on the outcome of these discussions at the December meeting
Better Care Without Delay (BCWD)
The controls implemented by NHSG to achieve the BCWD targets were generally operating as intended.
NHSG is to establish a Clinical Guidance Intranet which will be used as a repository for clinical guidance. This has been very effective but only short-term funding is available. Mr Muir stated that he was supportive of this initiative and would like to see a sustainable solution.
Mr Carey stated that he would discuss the possibility of a sustainable funding source with Mr Gray and update the Committee at the December meeting.
Mr Carey and Mr Gray to consider funding options for the Clinical Guidance Intranet.
Voluntary Severance
There were no significant matters arising from the report and the findings were accepted by the Committee / PWC
PWC
PWC
PWC
PWC/
Deloitte
RC/AG
5.3 / High Priority Recommendations
Mr Sands highlighted the following matters:
Good progress had been made in terms of the implementation of the reported high priority internal audit recommendations between July and September 2011. Four recommendations were still ongoing three relating to medical equipment procurement and one regarding IT general controls. Clear actions have been agreed and there is good visibility on progress.
The timescale for implementation of a medical equipment management system has slipped to 31 March 2012. All other recommendations should be in place by December 2011.
Mr Anderson questioned why it has taken so long for the Joint Medical Equipment Committee (JMEC) to arrange a schedule of regular meetings. Mr Kidd stated that he has requested that the lack of progress on this issue should be part of the agenda for the next Strategic Procurement Performance Group (SPPG) on 28 October 2011 and that agreement on a way forward be agreed.
Mr Kidd to provide an update at the December meeting.
The Committee noted the report. / GK
6 / External Audit
6.1 / Annual Audit Report
Ms Cobb stated that the audit process went very smoothly in 2010/11 with an unqualified audit report. There was a good working relationship between Audit Scotland and the NHSG Board, Committees and Finance Team. Ms Cobb thanked all involved for their assistance in the past five years.
Mr Kidd replied thanking Audit Scotland for their involvement over the years.
Ms Cobb stated that Audit Scotland would meet with Deloitte LLP later in the year as part of a managed changeover process. Key accounting challenges facing the Board in future years include heritage assets and potential consolidation of endowment funds.
Mr Mackie asked for a definition of a heritage asset. Ms Cobb replied stating that these assets were generally found in museums belonging to the people in perpetuity eg a picture of historical interest that may have a value. Generally these would be donated assets. Mr Kidd explained that NHSG require to carry out an exercise to catalogue these assets and assess whether they have any monetary value.
Mr Muir raised the question of insurance for these assets. Ms Cobb replied that if an item was valuable then Boards would require to examine whether a case to insure exists.
Mr Carey commented that this was a positive report and demonstrated how well NHS Grampian managed significant challenges and suggested that the report should be publicly available.
Cllr Howatson suggested that the report should be shared with the local MSPs at the scheduled meeting on Friday 16 September and also be considered at a future Board Meeting. Ms Cobb stated that the annual accounts had still to be laid before parliament and that she would check when the report could be made publicly available.
Mr Anderson passed on his thanks to Audit Scotland for their close and productive working relationship with NHSG.
Ms Cobb to confirm when the report can be made publicly available.
Mr Kidd to provide an update on the proposed accounting arrangements for heritage assets including management of insurance risks to the December meeting.
The Committee noted the report. / Aud Scot
GK
6.2 / Audit Scotland National Studies Update
Mr Kidd requested that the Committee note the receipt of the report "Transport for Health and Social Care" which has been issued to Gerry Donald, Head of Physical Planning for review and to develop an action plan.
Ms Cobb stated that under the new Code of Audit Practice, Boards external auditors will be required to regularly review whether these reports are being distributed and utilised appropriately by management.
Cllr Howatson requested that progress on the development of an action plan for the recently received report on Community Health Partnerships should be closely monitored. Mr Gray offered to review the status of this report and provide an update at the next meeting.
Mr Gray to request an update on progress to be available for the December meeting.
The Committee noted receipt of the update paper. / AG
7 / Single Tender Register
The Committee noted that there had been no single tender actions since the last meeting.
8 / Losses and Write Off
8.1 / B1 Medical Write Off
Mr Kidd presented the report prepared by Mr Sharp, Assistant Director Of Finance.
B1 Medical Ltd ceased trading on 15 June 2011 owing NHSG £56,084.56.The company was created to manage patents arising from research and development activity. Contact has been made with the receivers who have now confirmed that there are no assets for distribution. NHSG however has retained the legal title to the patents. Approval was sought from the Committee to write-off this amount and then submit the pro forma loss schedule to Scottish Government.
Mr Gray suggested that an exercise should be undertaken to review the extent to which NHS Grampian are exposed to risk if similar arrangements exist with other companies for patents.
Mr Gray and Mr Kidd to review the extent to which similar arrangements for patent management exist with other companies and assess any potential risks for the December meeting.
The Committee raised the issue of due diligence on this type of Company. Mr Kidd stated that he is working with colleagues to determine what practical steps can be taken to assess a company’s financial health at the pre contract stage
The Committee approved the write-off and for the pro forma to be submitted. / AG/GK
9 / AOCB
The Committee noted the 2012 meeting dates.
Date of Next Meeting
Thursday 1 December 2011, 1000-1300, Conference Room, Summerfield House
1