NHS West Essex Clinical Commissioning Group

Transcription

1 NHS West Essex Clinical Commissioning Group Annual Audit Letter for the year ended 31 March 2015 July 2015 Ernst & Young LLP

2 Contents

3 Contents Ernst & Young LLP 400 Capability Green Luton LU1 3LU Tel: Governing Body NHS West Essex Clinical Commissioning Group Building 4 Spencer Close St. Margaret s Hospital The Plain Epping, Essex. CM16 6TN 7 July 2015 Dear Member Annual Audit Letter The purpose of this annual audit letter is to communicate to the Members and external stakeholders, including members of the public, the key issues arising from our work, which we consider should be brought to the attention of the Clinical Commissioning Group (CCG). We have already reported the detailed findings from our audit work in our annual results report to the 27 May 2015 Audit Committee, representing those charged with governance. We do not repeat those detailed findings in this letter. The matters reported here are the most significant for the CCG. We would like to take this opportunity to thank the CCG staff for their assistance during the course of our work. Yours faithfully Debbie Hanson Director For and on 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 XNAMEXs is available for inspection at 1 More London Place, London SE1 2AF, the firm s principal place of business and registered office.

4 Contents Contents 1. Executive summary Key findings Control themes and observations Fees... 7 Relevant parts of the Audit Commission Act 1998 are transitionally saved by the Local Audit and Accountability Act 2014 (Commencement No. 7, Transitional Provisions and Savings) Order 2015 for 2014/15 audits. In April 2014 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 accountable officer 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

5 Executive summary 1. Executive summary 1.1 Key messages In this Annual Audit Letter to NHS West Essex Clinical Commissioning Group (the CCG), we summarise the work we have carried out during our audit. It is widely recognised that the NHS is under severe pressure and needs transformational change to deliver better outcomes for patients and ensure it lives within its means. All health bodies are striving to deliver sustainable high quality services in time of rising need and expectations and pressures on funding. NHS West Essex CCG has plans to improve the health outcomes for its population and to make patients experience of the local NHS better. The CCG has set out its ambitions and the progress made in the Annual Report. In , the CCG spent within its allocated resources, although its finances came under pressure during the year. The CCG originally planned to spend 3.2 million below its statutory resource limit. However, due to pressures during the year, the final reported outturn was an underspend of million, which was in line with in year projections. The CCG achieved 8.6 million of the planned 12.9 million transformation plans. In , the CCG plans to deliver its targeted surplus and further savings of million. The CCG s financial position is positive compared to many other CCGs which overspent their resource limits in and face deficit budgets in The Essex health economy faces severe financial and operational challenges in and beyond and is recognised nationally as a challenged health economy. As a result, NHS England has recently identified Essex as one of three areas to take part in a new Success Regime, described as a whole system intervention. This initiative recognises that the problems faced by the local health and social care economy cannot be solved by each organisation in isolation, but that all parties need to join together to develop and deliver the improved services that patients and service users need. Additional support and direction will be provided as part of the initiative. The Success Regime will aim to produce a single strategic plan for the local health and care system shared by all local stakeholders and support them to deliver it. 1.2 Respective responsibilities Our audit work has been undertaken in accordance with the Audit Plan that we issued on 18 March 2015 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 Clinical Commissioning Group (CCG) 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: expressing an opinion on: the financial statements; the regularity of expenditure and income; the parts of the remuneration report to be audited; the consistency of the information given in the annual report with the financial statements; and EY 1

6 Executive summary whether the accounts template is consistent with the CCG s financial statements for the relevant reporting period. reporting by exception: if the annual governance statement does not comply with NHSE Guidance or is not consistent with our understanding of the CCG; to the Secretary of State for Health and NHS England if we have concerns about the legality of transactions of decisions taken by the CCG; any significant matters that are in the public interest. forming a conclusion on the arrangements the CCG has in place to secure economy, efficiency and effectiveness in its use of resources. Reporting on an exception basis any significant issues or outstanding matters arising from our work which is relevant to the NAO as group auditor.. Summarised below are the results of our work across all these areas: Area of work Result Opinion on the: Financial statements Regularity of income and expenditure Parts of remuneration report to be audited Consistency of the Annual Report with the financial statements Reports by exception: Unqualified the financial statements give a true and fair view of the financial position of CCG as at 31 March 2015 and of its expenditure and income for the year then endedunqualified financial transactions were conducted within the CCG legal framework No matters to report the remuneration report was prepared properly within the rules set. Financial information in the Annual Report was Consistent with the Annual Consistency of Governance Statement Referrals to the Secretary of State and NHS England Public interest report and The Governance Statement was consistent with our understanding of the CCG No matters to report or refer No matters to report in the public interest. Value for money conclusion No matters to report we issued an unqualified conclusion Reporting to the CCG on its accounts template We concluded that the CCG s accounts template agreed to the audited financial statements. EY 2

7 Executive summary Reporting to the National Audit Office (NAO) in line with group instructions No matters to report As a result of the above we have also: Issue a report to those charged with governance of the CCG communicating significant findings resulting from our audit. 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 Audit results report (final) issued on 27 May 2015 Issued on 28 May 2015 EY 3

8 Key findings 2. Key findings 2.1 Financial statement audit The Annual Report and Accounts is an important tool for the CCG to show how it has used public money and how it can demonstrate its financial management and financial health. We audited the CCG 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 28 May Our detailed findings were reported to the 27 May 2015 Audit Committee and 28 May 2015 Board. The CCG Accounts and Annual Report were produced and submitted in accordance with NHS England s timetable. The quality of the accounts and working papers has been very good. There have been only minor adjustments to bring the accounts and annual report into line with the Annual Reporting Guidance (ARG). The main adjustments that have been made relate to the annual report and remuneration report. The main issues identified as part of our audit are summarised below: Significant risk: risk of financial misreporting Management is in a unique position because of their ability to directly or indirectly manipulate accounting records and misreport the financial position within the financial statements by overriding controls that otherwise appear to be operating effectively. We identify and respond to this risk on every audit engagement and included this in the Audit Plan we presented to the CCG. The audit work we have undertaken to respond to this risk has included: testing the appropriateness of journal entries recorded in the general ledger and other adjustments made in the preparation of the financial statements; reviewing accounting estimates for evidence of management bias; and evaluating the business rationale for any significant unusual transactions. As a result of the significant financial pressures faced by West Essex, along with other CCGs, we also: performed detailed tests to confirm the completeness of accruals and provisions; tested cut off to ensure transactions are recorded at the correct value and in the correct period; reviewed lead commissioning arrangements, to ensure the correct allocations of costs and income between partner bodies have taken place; and reviewed the agreement of year end balances with other NHS bodies and the position on any significant disputes. Findings: Our audit work did not identify any issues or unusual transactions which indicated that there has been any misreporting of the CCG s financial position. Other key findings: agreement of balances with providers and other NHS bodies Our Audit Plan also noted risks associated with the lack of patient and activity data to support the charges being made by some of the CCGs provider Trusts, along with some ongoing disputes regarding payments due by the CCG with other parties. EY 4

9 Key findings Our audit work to address this risk included: Testing commissioning spend in detail; Reviewing year end accruals for commissioning costs and the underlying assumptions applied by management in calculating the accruals; Reviewing year end contract reconciliations and agreeing them to agreed contract values and invoices; and Review of the agreement of balances between NHS bodies and the position on any significant disputes. Findings: The CCG has been successful in agreeing a final year end position with its main provider Trusts as well as with some other London Trusts. It has also been successful in achieving a favourable outcome on a number of disputes. We noted however that a disagreement regarding charges for some specialised services along with charges for the property assets used by the CCGs have not yet been resolved. The CCG is continuing to take action to resolve these issues and we are satisfied that the position reported in the CCGs financial statements is supportable. However, the fact that these issues remain unresolved presents a potential risk for the CCG for 2015/16. Other key findings: Continuing healthcare information We brought to the Committees attention inadequacies of the continuing healthcare (CHC) QA database. Figures for CHC spend within the accounts were based on the invoices received and, based on our audit work, we were therefore satisfied that the figure was materially accurate. However, the completeness and accuracy of the figure could not be confirmed from the CHC QA database itself. Work is ongoing to try to cleanse and improve the accuracy of the data held by the CHC team. 2.2 Value for money conclusion We carry out sufficient and relevant work to conclude whether the CCG has put in place proper arrangements to secure economy, efficiency and effectiveness in the use of resources. This is known as our value for money conclusion. In accordance with guidance issued by the Audit Commission, our value for money conclusion was based on two criteria. We consider whether the CCG had proper arrangements in place for: Securing financial resilience Challenging how it secures economy, efficiency and effectiveness We issued an unqualified value for money conclusion on 28 May We noted the following issues as part of our audit. Significant risk: Financial planning and management The CCG is facing significant financial challenges, and the pressure to achieve financial targets is seen to be a significant risk to our value for money conclusion. In considering the CCG s arrangements for securing financial resilience, and for challenging how it secures economy, efficiency and effectiveness, we concluded that: That the CCG received positive feedback from the Local Area Team reviews The CCG has demonstrated strong financial control. This is demonstrated by the delivery of 8.6 million of the planned 12.9 million transformation plans. The implementation of a financial recovery plan and use of Mede-Analytics (a company that analyses provider data and provides the CCG with performance monitoring EY 5

10 Key findings data) and other information streams has helped the CCG to maintain financial control despite the lack of patient data from key providers. The CCG has achieved it statutory break even duty, reporting a surplus of 0.8 million, although it has not achieved its target surplus of 3.2 million. The CCG has plans in place for longer term financial planning. Growth funding in 2015/16 is 18.8 million, which equates to an increase of 5.3 per cent in comparison to Whilst the revision in allocations has provided a greater degree of certainty in developing financial plans it is, however, clear that the CCG will need to deliver significant efficiencies and transformation over the coming years. It is anticipated, in the latest CCG Financial report that if budgets are subject to no significant change in 2016/17 the underlying surplus will increase to 4.810m. We therefore concluded that the CCG s arrangements for securing financial resilience and securing economy, efficiency and effectiveness were adequate and our value for money conclusion was unqualified Department of Health group instructions The NHS England group reporting instructions were amended this year and we were only required to report to the NAO on an exception basis if there were significant issues or outstanding matters arising from our work. There were no such issues. Annual governance statement We are required to consider the completeness of disclosures in the CCG 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. We completed this work and did not identify any areas of concern. EY 6

11 Control themes and observations 3. Control themes and observations As part of our work, 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 control, we are required to communicate to you significant deficiencies in internal control identified during our audit. We performed a substantive audit approach this year, and have therefore not tested the controls of the CCG. We have therefore not expressed an opinion on the overall effectiveness of internal control. We have not identified any significant deficiencies in the design or operation of an internal control that might result in a material misstatement in your financial statements of which you are not aware. We would note that we were aware from an early stage in the audit that adequate controls were not in place within the Central Eastern Central Support Unit (CSU) for the first six months of the financial year. The auditor s report for North East London CSU for the second half of the financial year was also qualified due to control weaknesses. This did not impact on our ability to issue an unqualified conclusion as we adopted a fully substantive approach to our audit, which involves testing individual transactions rather than relying on controls, as noted above. EY 7

12 Fees 4. Fees Our fee for is in line with the scale fee set by the Audit Commission and reported in our 27 May Annual Results Report. EY 8

13 EY Assurance Tax Transactions Advisory Ernst & Young LLP Ernst & Young LLP. Published in the UK. All rights reserved. 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. ey.com