Annual Audit Letter. East Midlands Ambulance Service NHS Trust Audit 2009/10 August 2010

Transcription

1 Annual Audit Letter East Midlands Ambulance Service NHS Trust Audit 2009/10 August 2010

2 Contents Key messages 3 Financial statements and statement on internal control 5 Use of resources 6 Closing remarks 10 Appendix 1 ALE key findings and conclusions 11 Status of our reports The Statement of Responsibilities of Auditors and Audited Bodies issued by the Audit Commission explains the respective responsibilities of auditors and of the audited body. Reports prepared by appointed auditors are addressed to non-executive directors/ members or officers. They are prepared for the sole use of the audited body. Auditors accept no responsibility to: any director/member or officer in their individual capacity; or any third party.

3 Key messages Key messages This report summarises the findings from our 2009/10 audit. It includes messages arising from the audit of your financial statements and the results of the work I have undertaken to assess your arrangements to secure value for money in your use of resources. Audit Opinion 1 I issued an unqualified opinion on your financial statements on 8 June Financial Statements 2 The arrangements for the production of your financial statements are effective. The draft financial statements were submitted to the Department of Health by the submission deadline. You provided good quality supporting working papers at the start of the audit visit and finance staff responded promptly to queries. 3 Two non-material uncertainties and one material error were identified and further details are provided in paragraph 12. The material error was amended in the final version of the financial statements. Use of resources 4 I am required to conclude on whether you have put in place adequate arrangements for securing economy, efficiency and effectiveness in its use of resources. I assess your arrangements against the 12 criteria specified by the Audit Commission. My conclusion is informed by my work on the Auditor's Local Evaluation. I have assessed your arrangements as adequate in all 12 areas. Financial health 5 Your financial health during 2009/10 was strong but the economic downturn is having a very significant impact on all public finances and the bodies that manage them. An immediate impact has been felt by most NHS trusts through the 0 per cent uplift in commissioning contracts although you have secured 5 per cent recurrent growth on 2009/10 baseline in your A&E contracts. Despite this you have a challenging cost improvement plan of 6.2 million. 6 You also have operational challenges. Activity has increased substantially over the last 15 months and you have recently implemented a single dispatch system. As at the end of June you were not achieving your key performance targets. This could have significant financial implications because a performance penalty may be imposed by commissioners if key targets are not achieved. 3 East Midlands Ambulance Service NHS Trust

4 Key messages 7 There are also wider and more fundamental impacts on the ability of public sector bodies to fund service delivery and capital programmes. More challenges are expected during 2010/11 particularly from the recent health white paper, Equity and excellence: liberating the NHS, and the revised Operating Framework for 2010/11. 8 These risks impact on the audit and, as part of my responsibility, I will monitor your financial resilience and service performance throughout the year. In particular I will consider the achievement of your cost improvement plan and your response to the operational challenges. Audit fees 9 In my audit plan letter dated 3 April 2009 I set out my audit fee of 123,000 however this has changed during the year as follows. I carried out additional work to assure myself that your performance management and financial management arrangements continue to perform at the level assessed in 2008/09. The additional fee was 3,275. Testing by internal audit of your payroll system and assessment of your journal controls identified weaknesses in controls, which increased the risk of material error. I carried out additional work in these areas to provide sufficient assurance that your financial statements are materially correct. The additional fee is Table 1 sets out the fee changes. Table 1 Audit fees Actual Proposed Variance Financial statements 68,925 68, per cent Value for money 58,275 55, per cent Total audit fees 127, , per cent Independence 11 I can confirm that the audit has been carried out in accordance with the Audit Commission s policies on integrity, objectivity and independence. East Midlands Ambulance Service NHS Trust 4

5 Financial statements and statement on internal control Financial statements and statement on internal control Your financial statements and statement on internal control are an important means by which you account for your stewardship of public funds. Significant issues arising from the audit 12 The financial statements contained one material error, which was amended in the final version of the accounts. An unpaid invoice relating to annual fleet insurance due on 1 April 2010 had been accounted for in 2009/10 as part of the accounts payable purchase ledger balances. This meant that payables and receivables were overstated by 1,729,000; there was no impact on net assets or comprehensive income. 13 The financial statements also contained two non-material uncertainties relating to expenditure in the Statement of Comprehensive Income. These were identified in the following balances. Employee benefits. Testing of your timesheet forms identified an underpayment of Cut-off testing. Substantive testing of cut-off processes identified two invoices for 1,188 that related to 2009/10 but had not been accrued for. 14 In these circumstances I am required to extrapolate the error to establish whether it could result in a material misstatement. The extrapolated errors are 211,000 for employee benefits and 254,000 for accruals. These uncertainties were not material but were above my triviality threshold; therefore I reported them to you for consideration prior to approval of the accounts. Material weaknesses in internal control 15 I did not identify any significant weaknesses in your internal control arrangements. Accounting practice and financial reporting 16 I reported one matter relating to qualitative aspects of your financial reporting in my Annual Governance Report. During 2009/10 you failed to achieve three out of four targets against the Better Payment Practice Code i. This is a key administrative target that the Trust has not complied with. A recommendation was agreed to help improve this performance in 2010/11. i All NHS bodies must meet a Better Payment Practice Code target of paying 95 per cent of bills within contract terms or 30 days where no terms have been agreed. 5 East Midlands Ambulance Service NHS Trust

6 Use of resources Use of resources I considered how well you are managing and using your resources to deliver value for money and gave a scored Auditors Local Evaluation (ALE) judgement. I also assessed whether you have put in place adequate corporate arrangements for securing economy, efficiency and effectiveness in your use of resources. This is known as the value for money (VFM) conclusion. ALE judgements 17 In forming my scored ALE judgements, I have used the methodology set out in the 'ALE for Trusts' guidance. Judgements have been made for each key line of enquiry (KLOE) using the Audit Commission s current four point scale from 1 to 4, with 4 being the highest. Level 1 represents a failure to meet the minimum requirements at level During 2009/10 the ALE approach was risk based; I did not reassess those themes for which you scored a level 3 or level 4 in 2008/09 but planned to carry forward the score from 2008/09. In order to mitigate the risk of an undetected deterioration in performance, I reviewed a number of 'triggers. Where these triggers highlighted a deterioration in performance I carried out a detailed review of the theme. 19 Your ALE scores for the five key areas are shown in Table 2 below. These scores are preliminary; the Quality Assurance process will conclude in August and scores will be confirmed in September 2010.The key findings and conclusions for the five themes, and the underlying KLOE, are summarised in Appendix 1. Table 2 Preliminary ALE scores Key area Preliminary scored judgement 2009/10 d judgement 2008/09 Financial reporting 3 2 Financial management 3 3 Financial standing 4 4 Internal control 3 3 Value for money You have sustained your good arrangements for financial management, internal control and financial standing. I reviewed only the triggers in these areas and found that there was no indication of deterioration in performance. East Midlands Ambulance Service NHS Trust 6

7 Use of resources 21 I was pleased to note improvements in your arrangements for financial reporting, particularly in managing faster close and preparing the accounts. This was achieved at a challenging time: a year when you moved your back office finance functions to NHS Shared Business Services (SBS), adopting new financial systems and new reporting mechanisms. 22 I also noted a fall in the quality of your arrangements for securing strategic and operational objectives (KLOE 5.1) but this did not affect the overall score for value for money. Specifically: your performance against vital signs targets deteriorated during 2009/10; and you had made limited progress in response to the NHS carbon reduction strategy. VFM conclusion 23 I assessed your arrangements to secure economy, efficiency and effectiveness in your use of resources against criteria specified by the Audit Commission. I issued an unqualified conclusion stating that you had adequate arrangements to secure economy, efficiency and effectiveness in your use of resources. 24 My conclusion was supported by: my ALE judgements; a review of your governance arrangements; ambulance benchmarking work; and the follow up of previous year's recommendations. Review of governance arrangements 25 There has been a period of considerable change and development at EMAS during the last eighteen months prompted by your aim for the Trust to gain authorisation as a foundation trust (FT). As part of this, you introduced new governance structures and restructured the executive management team. My continuous audit planning identified these new arrangements as a risk to the value for money conclusion and I carried out a review to establish the following. How effective are your current governance arrangements? To what extent do you comply with Monitor's Code of Governance for FTs? What further action is needed to comply with all aspects of Monitor's Code of Governance for FTs. 7 East Midlands Ambulance Service NHS Trust

8 Use of resources 26 I found that the new governance arrangements demonstrate adherence to good practice with no significant weaknesses in internal control. The Trust is anticipating the systems and reporting arrangements that will be needed as a FT. It is using Monitor's recommended approach to financial risk ratings and is implementing service-line management and reporting arrangements. I did, however, identify some areas for action or further development, these included the following. The use of forecasts in Board information should be improved. You should be able to demonstrate that your governance arrangements are effective. For example, at the time you needed to provide assurance that your risk management arrangements were fully embedded. Monitor's guidance to FTs on governance arrangements is not mandatory but is based on the principle of 'comply or explain.' There are some aspects of your governance arrangements that differ from usual practice and therefore you must be able to demonstrate that they are effective. For example, you need to provide assurance that the Board's and Audit Committee's role and relationship with the Clinical Quality and Governance Committee is fully understood. 27 Since I reported on these matters in early 2010 I am pleased to note that you have responded to and resolved many of the action points. I will formally follow up your progress during 2010/11. Ambulance service benchmarking 28 I undertook a benchmarking exercise with you. The aim was to provide comparative data to support appraisal of performance and value for money and agree appropriate actions. This may direct management activity in planning reviews of operational service delivery or backroom functions. 29 Analysis of the data demonstrates that EMAS in many ways is an average performing ambulance trust when compared with others. However, it has highlighted some interesting areas for further exploration. In the following areas you benchmarked as an outlier which, if investigated, may support improvement planning. Staff resources available to EMAS compare reasonably with others for clinical and support staff grades. Senior management and manager grades show low resource levels. This may reflect staff vacancies, but may also reveal an overall lack of management capacity. Estates costs are low per head of population and are the lowest compared with others for estate costs per thousand hectares. This may be due to lack of investment or prudent management of the estate, but data quality issues in compiling estates costs may also be a factor. Service line reporting introduced in 2008/09 should provide more accurate costs. However this is worthy of further review. East Midlands Ambulance Service NHS Trust 8

9 Use of resources Follow up of previous year's recommendations 30 I followed up two reviews from 2008/09. Review of service line reporting. Air ambulance arrangements - diagnostic review. 31 I found that you had made good progress against the recommendations and had achieved virtually all. These reviews are now closed. 9 East Midlands Ambulance Service NHS Trust

10 Closing remarks Closing remarks 32 I have discussed and agreed this letter with the Chief Executive and the Director of Finance. I will present this letter at the Audit Committee on 20 August 2010 and will provide copies to all board members. 33 Further detailed findings, conclusions and recommendations in the areas covered by our audit are included in the reports issued to you during the year. Table 3 Report Date issued Air ambulance arrangements - diagnostic review - follow up November 2009 Audit opinion plan January 2010 Review of service line reporting - follow up March 2010 Review of governance arrangements April 2010 Ambulance service benchmarking June 2010 Annual governance report June You have taken a positive and constructive approach to our audit. I wish to thank you and your staff for your support and co-operation during the audit. Ian Sadd District Auditor August 2010 East Midlands Ambulance Service NHS Trust 10

11 Appendix 1 ALE key findings and conclusions Appendix 1 ALE key findings and conclusions The following tables summarise the key findings and conclusions for each of the five key areas. Financial reporting A full review was undertaken on the financial reporting theme. Overall score 3 Key findings and conclusions The Trust produces annual accounts in accordance with relevant standards and timetables, supported by comprehensive working papers. Your other external reporting has demonstrated minimum standards. Some improvements have been made since 2008/09 but aspects of level 3 requirements were not evident: there was little discussion of trends and projections and inadequate evidence of wide availability and promotion of the annual report. KLOE 1.1 (annual accounts) Key findings and conclusions Your arrangements for preparing the annual financial statements are good. You have continued to build on your successful closedown process in 2008/09 and demonstrated improvement in 2009/10. You have responded positively and successfully to the implementation of International Financial Reporting Standards and faster close; this is demonstrated by an efficient year-end closedown process with the financial statements submitted on time and to a high standard with only classification errors. The audit visit was conducted quickly, helped by prompt and knowledgeable responses to queries. This was all delivered using new systems provided by NHS Shared Business Services. There was one error in the financial statements that effected the main statements but we confirmed that this was a one-off instance of misclassification that had no impact on net assets or comprehensive income and the relevant amendments made. An unqualified opinion was issued. The Audit Committee, as those charged with governance, provides a good level of challenge and scrutiny of all the relevant year end opinion documents including the financial statements, the statement on internal control and the remuneration report East Midlands Ambulance Service NHS Trust

12 Appendix 1 ALE key findings and conclusions KLOE 1.2 (external accountability) 2 Key findings and conclusions Your arrangements for external accountability are above minimum requirements but there are still some aspects that could be improved. Key findings were as follows. The annual report is produced in accordance with statutory requirements; my audit review identified only minor issues, which were amended in the final draft, and appropriate information has been included. There was insufficient commentary about trends/projections. The report includes some narrative about your priorities for 2010/11 and your environmental footprint but there was no consideration of trends/projections relating to financial matters. You have now consulted on the annual report and now produce an annual review, which is an accessible document that complements the annual report. However, it was unclear why these lessons learnt had not been incorporated into the annual report itself. There are documents available in different languages on request but evidence was not provided to demonstrate the availability and promotion of the annual report and its various formats. East Midlands Ambulance Service NHS Trust 12

13 Appendix 1 ALE key findings and conclusions Financial management I assessed your performance against the triggers when reviewing the financial management theme. Overall score 3 Key findings and conclusions against the triggers I have confirmed that there has not been a significant shift from your financial plan and that your medium-term financial plan has been reviewed in light of the savings required due to pressure on public spending. KLOE 2.1 (financial strategy and budgets) 3 Assessment of the trigger confirmed that your arrangements continue to perform at the level assessed in 2008/09. KLOE 2.2 (managing performance against budgets) 3 Assessment of the trigger confirmed that your arrangements continue to perform at the level assessed in 2008/09. KLOE 2.3 (asset base) 2 Assessment of the trigger confirmed that your arrangements continue to perform at the level assessed in 2008/ East Midlands Ambulance Service NHS Trust

14 Appendix 1 ALE key findings and conclusions Financial standing I assessed your performance against the triggers when reviewing the financial standing theme. Overall score 4 Key findings and conclusions against the triggers The Trust did not forecast a deficit at any time during the year and the forecast outturn was achieved. KLOE 3.1 (managing within available resources) 4 Assessment of the trigger confirmed that your arrangements continue to perform at the level assessed in 2008/09. East Midlands Ambulance Service NHS Trust 14

15 Appendix 1 ALE key findings and conclusions Internal control I assessed your performance against the triggers when reviewing the internal control theme. Overall score 3 Key findings and conclusions against the triggers You have not experienced a significant adverse event or received any external report suggesting that internal controls have not been operating adequately. You have reviewed your arrangements against the Board checklist and the general findings of the Audit Commission report Take it on Trust and developed an action plan to address gaps in assurance. KLOE 4.1 ( significant business risks) Assessment of the trigger confirmed that your arrangements continue to perform at the level assessed in 2008/09. KLOE 4.2 (internal control) Assessment of the trigger confirmed that your arrangements continue to perform at the level assessed in 2008/09. KLOE 4.3 (probity and propriety) Assessment of the trigger confirmed that your arrangements continue to perform at the level assessed in 2008/ East Midlands Ambulance Service NHS Trust

16 Appendix 1 ALE key findings and conclusions Value for money When reviewing the value for money theme, I reviewed your performance against the triggers which prompted me to carry out a detailed review. Overall score 3 Key findings and conclusions My value for money work established that your arrangements for managing and improving value for money are consistently above minimum requirements however the arrangements for securing strategic and operational objectives have weakened during the year. At the time of our review your performance against vital signs performance targets had deteriorated. The Trust has made limited progress with reducing carbon emissions and developing the 'green' agenda. KLOE 5.1 (strategic objectives) Key findings and conclusions You have had a difficult year due to unprecedented winter pressures between December 2009 and February 2010, senior management capacity issues and some disappointing results in routine external inspections. You, along with key partners, have been stretched by the winter conditions this year and have had to manage increased demand for your services especially from emergency callers with response time targets coming under challenge on a daily basis. You have managed the pressures by seeking additional resource and prioritising activity. There has been real time performance reporting and frequent situation reporting over this challenging period but performance at year end did not meet contractual targets. Careful performance monitoring especially around the routine external inspection results had pulled performance back to acceptable levels into early 2010/11. You have made limited progress in response to the NHS Carbon Reduction Strategy 2009 with no identifiable savings from energy reduction measures or procurement for sustainability reported. A draft Sustainability Strategy was produced and approved in January Practical actions in relation to staff involvement are in place with a Greener EMAS communications strategy, well-designed intranet information and an energy saving poster campaign. A utility baseline measurement of your estate is just starting and there is work with partners on procurement. Further work is required to ensure that a more comprehensive strategy for sustainability is developed and that practical actions are undertaken and monitored. 2 East Midlands Ambulance Service NHS Trust 16

17 Appendix 1 ALE key findings and conclusions Key findings and conclusions You have a strong focus on strategic direction, which has been enhanced by the work undertaken in preparation for foundation trust status. The contract with commissioners is more detailed than previous years and includes elements of partnership for example around service delivery by air ambulance services. Contract management remains strong and there is now a more direct link between service delivery, contract pricing and income management. This is starting to be translated within the Trust to service line reporting though there is still further work to be undertaken in this area. The use of Performance Accelerator has developed and is now the key tool in managing performance. More staff are trained and there is greater consistency with its use. Divisional and operational plans are comprehensive and plans in relation to external assessment are well documented. For example when a Care Quality Commission (CQC) inspection in 2009 found that infection control measures were not adequate an extensive performance management plan for improvement was put into place and monitored through Performance Accelerator. Sickness levels have also increased which have added to pressures; the levels are high and above target and are a concern for a service with increasing activity and exacting response targets. KLOE 5.2 (services) Key findings and conclusions You have maintained the arrangements assessed in 2008/09. In my review I noted the following improvements. You have developed a new communications strategy with accompanying action plan. This strategy has more emphasis on market targeting and branding issues as tactics for communication, for example in first aid training marketing. The communications action plan demonstrates significant efforts to reach hard to reach groups with new website design and additional functionality for accessibility, the publishing of new leaflets and new communication methods. The strategy highlights areas where additional support for those with dyslexia and sensory impairments is required. It also clearly supports communication of corporate objectives. There is a positive link of corporate values to reports in the staff newsletter. This supports a regular and practical application of Trust values to achievements of staff and the services provided. This reinforces the values in an easily assimilated way and sets them within real service delivery stories with which all staff can identify East Midlands Ambulance Service NHS Trust

18 Appendix 1 ALE key findings and conclusions KLOE 5.3 (data quality) Key findings and conclusions You have maintained your robust arrangements for monitoring and reviewing performance. The process for monitoring performance against strategic business objectives has been strengthened and the Board receives regular reports of progress using Performance Accelerator as the key tool for monitoring and presenting reports on performance, risk and action planning for improvement. Exception reporting is used to highlight issues and direct management action. There is a clear reporting pathway between actual performance data collected by the CAD (computeraided dispatch) and Board and contract reporting. Where external reviews have established issues to be addressed they are subject to action plans which are monitored through Performance Accelerator. The issues raised by CQC on infection control measures have been managed in this way with eventual success and positive outcome at reassessment. Data quality is subject to policy and protocol. Key indicators such as response time targets are subject to quality checks and validation at CAD and business intelligence level prior to issue. There is a programme of cross training for staff preparing performance reports to ensure capacity and capability in this area. The business intelligence unit is now responding to a wide range of requests for service based data and is comparing and contrasting results to support dialogue between divisions, so that partners understand service pressures and where service improvement can be made. A good example is your work around alcohol-related incidents where other partners, such as police and local authorities, can contribute to reducing incidents where there is ambulance service activity and hospital admission. KLOE 5.4 (managing resources) Key findings and conclusions You have maintained your structured approach to the management of resources. I identified the following changes from my 2008/09 assessment. Your performance against the Better Payment Practice Code was below the target in three out of the four measures predominantly caused by the adoption of new processes when the financial systems moved to NHS Shared Business Services. You have an efficiency plan to produce a surplus at year end and this was achieved. You have carried out additional benchmarking of service delivery between divisions and this has been enhanced by additional training and improved budget and income and expenditure reporting at divisional level. 3 3 East Midlands Ambulance Service NHS Trust 18

19 The Audit Commission The Audit Commission is an independent watchdog, driving economy, efficiency and effectiveness in local public services to deliver better outcomes for everyone. Our work across local government, health, housing, community safety and fire and rescue services means that we have a unique perspective. We promote value for money for taxpayers, auditing the 200 billion spent by 11,000 local public bodies. As a force for improvement, we work in partnership to assess local public services and make practical recommendations for promoting a better quality of life for local people. Copies of this report If you require further copies of this report, or a copy in large print, in Braille, on tape, or in a language other than English, please call Audit Commission 2010 For further information on the work of the Commission please contact: Audit Commission, 1st Floor, Millbank Tower, Millbank, London SW1P 4HQ Tel: Fax: Textphone (minicom):