ATTACHMENT A
Royal National Orthopaedic Hospital NHS Trust
2008/09 AUDIT COMMITTEE ANNUAL REPORT
REPORT FROM THE CHAIR OF THE AUDIT COMMITTEE
24 April 2009
The Audit Committee is the senior committee of the Board and is one of three standing committees the Trust Board is required to appoint. The Audit Committee is composed solely of 3 Non Executive Directors and is supported by members of the Executive Team, including the Chief Executive and Director of Finance as well as Internal Audit (RSM Bentley Jennison), External Audit (Grant Thornton) and a Local Counter Fraud Officer.
This report sets out how the committee met its terms of reference, which were approved in January 2008 and the standards set out in the NHS Audit Committee Handbook issued December 2005.
1. AUDIT COMMITTEE WORK PROGRAMME 2008/09
1.1. The Audit Committee programme of work was agreed at the start of the year through the work programmes Internal and External Audit presented in April 2008. These work programmes informed the Audit Committee’s agenda for the year ahead and was further enhanced by the Committee’s planning of reports it expected to receive during the meetings it was planning to hold.
The Committee met on four occasions during the year and all Committee members were present at each meeting. An update of each Audit Committee meeting is provided to the Trust Board and the Risk Management Committee at the first available meeting after the Committee has met.
1.2. In relation to its principal role to support the Board by reviewing the comprehensiveness, reliability and integrity of assurances, the Committee at its June 2008 meeting reviewed the Annual Accounts and gained satisfactory confidence from the External Auditors on the process followed and responses from the Trust on issues raised in the Letter of Representation.
1.3. The Statement of Internal Control was also reviewed as well as the Head of Internal Audit opinion that supported it. As a result, the Committee was able to recommend that the Board approve and adopt the Annual Accounts and Statement of Internal Control.
1.4. The Committee will perform the same role at its June 2009 meeting.
1.5. The Committee receives an update of the outcomes (by way of minutes and revisions to the Assurance Framework), of the Trust’s Risk Management Committee at each meeting. A joint meeting is planned for May 2009 to review the role of each committee and to develop a shared strategic vision setting out clear objectives and responsibilities.
1.6. On behalf of the Board, the Committee has been formally delegated to review the following, which it did during the year:
a. All risk and control related disclosure statements (in particular the Statement on Internal Control and declarations of compliance with the Standards for Better Health), together with any accompanying Head of Internal Audit statement, external audit opinion or other appropriate independent assurances, prior to endorsement by the Board;
b. The underlying assurance processes that indicate the degree of the achievement of corporate objectives, the effectiveness of the management of principal risks and the appropriateness of the above disclosure statements;
c. The policies for ensuring compliance with relevant regulatory, legal and code of conduct requirements;
d. The policies and procedures for all work related to fraud and corruption as set out in Secretary of State Directions and as required by the Counter Fraud and Security Management Service.
1.7. This will be evidenced through the Committee’s use of an effective Assurance Framework to guide its work and that of the audit and assurance functions that report to it.
1.8. The Committee gains assurance about the adequacy and effectiveness of internal control in year from the audit reports it receives from both the Trust’s Internal Auditors (RSM Bentley Jennison) and External Auditors (Grant Thornton). These were then further supported by the Head of internal Audit letter prepared and presented as part of the Annual Accounts process and the External Audit Annual Audit letter presented to the Committee in October 2008.
1.9. Both Internal and External Audit have in place systems to review compliance with previous audit recommendations and the outcome is reported to the Audit Committee. The Committee approves the local counter fraud work plan and receives updates on progress with the plan and any individual allegations of fraud at its meetings. During the year, the Trust received a compound indicator score of 2 from the NHS Counter Fraud Service. A level 2 rating is given where ‘Effective completion of work across the full range of counter fraud actions as outlined in NHS policy needs to be evident as these are basic requirements for achieving adequate performance. Evidence in support of strong proactive work will be present and the investment given to counter fraud work will be adequate to complete work effectively’.
1.10. The Committee decided that the additional investment required to improve the compound indicator rating, which Counter Fraud Services indicated could only be achieved by increasing the number of days spent on counter fraud provision was not justified and agreed that the current arrangements were adequate to safeguard the organisation.
1.11. The Committee continues to review progress on the Use of Resources rating. The Trust achieved a rating of ‘Weak’ for 2007/8 and is on target to improve this in 2007/8. The Committee has reviewed progress against the External Audit improvement observations during the year and the action plans the Trust has put in place to meet these recommendations. The final outcome will be reported to the Board in September 2009.
1.12. The Committee in January 2009 scrutinised the revised standing Financial Instructions, Standing Orders and Scheme of Delegation. Following discussion, further explanation and some changes the Committee was able to recommend that the Trust Board approve the changes made to each at the February 2009 meeting of the Board.
1.13. The Audit Committee has sought to address the gaps in Audit Handbook Self-Assessment checklist review it undertook in 2007/08 and is able to report it has maintained its high standard. The progress updates showed that Committee met all the “must do” items and the majority of the ‘should do’ and ‘could do’ items. The ‘should do’ and ‘could do’ items would have been achieved in the main if the Audit Committee and Risk Management Committee workshop had been introduced in the current year. The expectation is they will be in place during 2009/10 and the self-assessment checklist will be considered met for all categories.
1.14. The Committee reviewed the performance of Internal Audit and Local Counter Fraud Service in 2008/09 and was able to report satisfactory progress against the contract to the Trust Board.
1.15. The Committee has reviewed a draft work programme and strategy for 2009/10, which has been agreed with Internal and External Audit. The Board will be asked to approve the work programme for 2009/10 and the Committee will monitor this work programme in year.
1.16. As part of the self assessment the Committee is required to assess whether it provides value for money. This is demonstrated by:
- The Committee requires and receives significant commitment from Non Executive and Executive Directors and other external and internal individuals;
- It conducts its business based on an agreed work programme that is completed in a timely and professional manner. It discharges the obligations placed on it through the Audit Committee Handbook in full;
- In addition it identifies areas of risk to the Trust and ensures focus is maintained on those areas. It maintains an overview of the costs of internal and external audit;
- It has reviewed the regularity and structure of its meetings together with its liaison with the Risk Management Committee in order to develop better effectiveness and efficiency.
1.17. The Audit Committee judges that it does provide value for money.
2. CONCLUSION AND RECOMMENDATION
2.1. The Audit Committee believes that it has demonstrated that it has met its duties set out in its terms of reference and continued to develop as demonstrated by the self assessment. The Audit Committee has fulfilled the work programme for 2008/09 and so has fulfilled its role as the Board’s senior sub committee allowing it to draw assurance on the adequacy and effective operation of the organisation’s internal control system.
2.2. The Trust Board is asked to note this report.
Laurence Milsted
Chairman Audit Committee RNOH NHS Trust
April 2009
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