Tairāwhiti District Health Board

Transcription

1 Financial Review briefing to the Health Committee 2011/12 Financial Year Tairāwhiti District Health Board 1 13 March 2013

2 2 Assistance to the Committee The Health Committee is conducting a financial review of the performance in the 2011/12 financial year and the current operations of Tairāwhiti District Health Board in accordance with Standing Order 340. The Controller and Auditor-General provides Parliament with assurance on the performance and accountability of public entities. The Office of the Auditor-General typically assists select committees with their financial reviews by providing further details on the results of the annual audit in Part A of our written briefings, and by suggesting lines of enquiry and questions relevant to the particular public entity under review in Part B of our written briefings. Our annual audits provide a high, but not absolute, level of assurance about whether a public entity s financial statements comply with generally accepted accounting practice (GAAP) in New Zealand and fairly reflect its financial position and its financial and service performance for the period audited. Due to the volume of transactions, audit work is planned and performed to obtain evidence on a sample basis. Auditors use professional judgement to assess the evidence and ensure there is reasonable assurance that there are not material misstatements in the financial statements (that is, differences or omissions that would affect someone s overall understanding of the financial statements). We report, in our audit opinion, only material differences or omissions that we find. To identify lines of enquiry for Part B of this briefing, we: analyse the results of the annual audit and the accountability documents; refer to any relevant performance audit or inquiry work; and use our specific knowledge of the entity gained during the audit process and by ongoing contact with the entity. Where necessary, we checked factual information with the department or other entities to ensure that our advice to the committee is accurate. We did not give the entities any of the contemplated or actual advice that is in this briefing. Contact for further explanation If any member of the Committee would like further explanation or elaboration of any aspect of this briefing document, please do not hesitate to contact Felicity Caird, Sector Manager, Parliamentary Group on or felicity.caird@oag.govt.nz at the Office of the Auditor-General.

3 Summary of key issues 3 Part A: Results of the 2011/12 audit We issued an unmodified audit opinion on the financial statements and statement of service performance of Tairāwhiti District Health Board (Tairāwhiti, or the DHB). We assessed and graded Tairāwhiti s management control environment and its financial information systems and controls as good. Both grades were an improvement on the previous year when they were assessed as needs improvement. We assessed Tairāwhiti s service performance information and associated systems and controls as needing improvement. We recommended improvements to the DHB s non-financial performance reporting, including that Tairāwhiti ensure that it has robust systems, procedures and controls to ensure that its non-financial performance information is reliable. The main matters arising out of the audit are: - We noted that the DHB continues to operate in a financially challenging environment. We concluded that the going concern assumption remains appropriate for the DHB. - We recommended that the DHB update its asset management plan, to ensure its management of assets is consistent with good practice. Part B: Advice to the Committee The key points we cover for the Committee, and suggest questions on, are: Financial sustainability Tairāwhiti reported a surplus of $25,000 for 2011/12 and has forecast to break-even from 2012/13 to 2014/15. We suggest the Committee ask for an update on the DHB s financial performance in 2012/13, its cost containment initiatives and the impact of the 2012 seismic evaluation of DHB buildings. We also suggest the Committee ask about the main costs and benefits for Tairāwhiti from regional and national shared service initiatives, including those led by HealthShare Limited and Health Benefits Limited. Clinical sustainability Tairāwhiti s small size, geographic isolation and population demographics contribute to its financial and clinical challenges. We suggest the Committee ask about the main opportunities and barriers to improving Māori health outcomes. We outline some of the changes to health services, including a shift to Waikato DHB for the provision of tertiary cancer treatment services and potentially also tertiary mental health services. Tairāwhiti also has new arrangements for its air ambulance service which is now based out of Gisborne rather than Napier. We suggest questions about the costs and benefits, and the impact on patients, of these new arrangements. The Committee may also wish to ask for an update on the DHB s Locality Planning to develop more integrated services through partnership with primary care. Rheumatic Fever the Rheumatic Prevention Programme was launched in Tairāwhiti in early 2012 to provide throat swabbing services through schools and antibiotic treatment, to reduce the rate of rheumatic fever in Tairāwhiti. The Committee may wish to ask for an update on the programme. Health targets Tairāwhiti met or improved its performance against four of the six national heath targets from Quarter Four in 2011/12 to Quarter Two in 2012/13. We suggest questions about the other two targets about the drop in access to elective surgery, and what the DHB is doing to increase immunisation rates for eight-month olds.

4 4 Overview of Tairāwhiti DHB Tairāwhiti DHB was established by the New Zealand Public Health and Disability Act 2000 and is a Crown agent under the Crown Entities Act Tairāwhiti is the third smallest of the 20 DHBs. It has a secondary hospital located in Gisborne. It is one of five DHBs in the Midland region, the others being Taranaki, Waikato, Lakes, and Bay of Plenty DHBs. The Midland Regional Services Plan 2012/13 provides an overview of the region and the five DHBs ( Tairāwhiti is the smallest of the Midland DHBs with about 6% of the region s population. 1 Tairāwhiti has an estimated population of 46,900 people, of whom 47.8% identify as Māori. It has a (proportionally) young population, with 38.3% of people under the age of 25. Although only 12.6% of the population are over 65, this is expected to increase to 20% by Tairāwhiti has the highest rate of deprivation in New Zealand with 65% of the population living in either quintile 4 or 5 deprivation categories. 3 The DHB s key focus areas are: 4 system integration; regional collaboration; and living within its means. Tairāwhiti s group organisational structure is as follows: 5 The Board is chaired by David Scott, and the CEO is Jim Green. The DHB employs about 700 staff. 6 Tairāwhiti last appeared before the Committee for a financial review for 2005/ Midland DHBs, Regional Services Plan 2012/13, page 17. Tairāwhiti DHB, Annual Plan 2012/13 & Statement of Intent 2012/15, pages 14 to 15. Midland DHBs, Regional Services Plan 2012/13, page 22. Tairāwhiti DHB, Annual Plan 2012/13 & Statement of Intent 2012/15, page 5. Tairāwhiti DHB, Annual Report for the year ended 30 June 2012, page 7. Tairāwhiti DHB, Annual Report for the year ended 30 June 2012, page 18.

5 Part A: Results of the 2011/12 audit 5 1 Audit opinion 1.1 We issued an unmodified audit opinion on the financial statements and statement of service performance of Tairāwhiti DHB. 2 Environment, systems and controls for measuring financial and service performance 2.1 Our conclusions on the DHB s management control environment, systems, and controls for measuring financial and service performance, for the year ended 30 June 2012, are set out in the table below. 2.2 We made our conclusions in the context of our work in forming an opinion on the DHB s financial and service performance statements. The purpose of commenting on the underlying environment, systems, and controls is to highlight areas for improvement identified during the audit. The grades assigned for 2011/12 reflect our recommendations for improvement as at 30 June They are not an assessment of overall management performance, or of the DHB s effectiveness in achieving its financial and service performance objectives. (See the Appendix One for an explanation of the grading scale and underlying assumptions.) Management control environment 2011/12 Good 2010/11 Needs improvement Improvements would be beneficial and we recommend that Tairāwhiti address these. Deficiencies we identified in 2010/11 have been resolved in part. Comment We identified the following areas for improvement: Tairāwhiti has not recently updated its Asset Management Plan (AMP). We have previously raised this and other areas for improvement to the DHB s management of assets. We continued to recommend that Tairāwhiti address these areas to ensure that its management of assets is consistent with good practice. We continued to recommend enhancements to the IT control environment, including the implementation of password-protected screensavers, and change management procedures. Other than the issues mentioned above, we found no deficiencies in the areas we reviewed during 2011/12.

6 6 Financial information systems and controls 2011/12 Good 2010/11 Needs improvement Improvements would be beneficial and we recommend that Tairāwhiti DHB address these. Deficiencies we identified in 2010/11 have been resolved in part. Comment We identified the following areas for improvement: We found that reconciliations between the payroll system and the general ledger were not being performed. We recommended that the DHB regularly perform reconciliations between the payroll system and the general ledger as part of the month-end processes. We identified one instance where a change in the payroll master file was not independently reviewed. We recommended that the DHB reiterate to staff the importance of independent review of any changes made to the master file. Other than the issues mentioned above, and based on the areas we reviewed during 2011/12, we found that appropriate policies, systems, and controls were in place and appeared to be operating effectively. Service performance information and associated systems and controls 2011/12 Needs improvement 2010/11 Needs improvement Improvements are necessary and we recommend that Tairāwhiti address these at the earliest reasonable opportunity. Deficiencies we identified in 2010/11 have been resolved in part. Comment The following comments are based on our review of the 2012/15 Statement of Intent (SOI), and our audit of the 2011/12 Statement of Service Performance and its supporting systems and controls. Overall, we considered that the 2012/15 SOI was an improvement on previous SOIs. However, we identified the following areas for improvement: We recommended that Tairāwhiti ensure that there are robust systems, procedures, and controls in place to ensure that it produces reliable non-financial information. This should include a regular independent review of the DHB s key non-financial systems and controls. Not all the dimensions of performance (quality, quantity, and timeliness) are adequately covered in the performance measures in each of the four output classes. These continue to be focused predominately on quantity and timeliness. There is the opportunity for the DHB to provide further contextual information for the performance results and targets. This should include both narrative and further comparative information. There continues to be the opportunity for the DHB to provide further clarification on the linkages between the outcomes, impacts, and outputs. Other than the issues mentioned above, and based on the areas we reviewed during 2011/12, we found that appropriate policies, systems, and controls were in place and appeared to be operating effectively. 2.3 The Committee may wish to ask:

7 We note the Auditor-General has recommended improvements to Tairāwhiti s service performance information and associated systems and controls. What action has been taken or is planned to address these recommendations? 7 3 Significant matters of audit interest 3.1 We noted the following significant matters of interest from our audit of Tairāwhiti. Financial sustainability 3.2 Financial sustainability continues to be a challenging area for the DHB. The surplus for the year ended 30 June 2012 was $25,000 against a District Annual Plan budgeted surplus of $22,000. Although this is a pleasing financial result for 2011/12, Tairāwhiti continues to operate in a financially challenging environment that is compounded by the uncertainty of inter-district flows each year. 3.3 The DHB s Finance, Audit, and Information Technology (FAIT) Committee, and management have been very focused on the financial results of Tairāwhiti, and are continuing to investigate options for managing the increasing demands on funding. 3.4 The FAIT Committee considered management s assessment of the application of the going concern assumption for preparing the DHB s financial statements, and concluded that it remained appropriate. 3.5 From this assessment and conclusion, and our own discussions with the FAIT Committee and management, we are satisfied that the going concern assumption remains appropriate for the DHB. Management of capital assets 3.6 In 2011, we identified that the DHB s management of capital assets needed improvement and that the AMP had not been regularly updated. 3.7 We recognise that the management of assets, and the associated AMP, need to be consistent with the regional clinical services plan. However, preparation of the regional clinical services plan and other sector initiatives may have affected the delay in Tairāwhiti updating its AMP. 3.8 Given the significance of the DHB s asset portfolio, we continue to recommend that the AMP be updated to be consistent with good practice, including incorporating our recommendations from the 2011 audit. 3.9 We understand that the DHB is in the process of updating its AMP 4 Legislative compliance 4.1 We reviewed the systems and procedures that Tairāwhiti uses to identify and comply with legislative requirements. No issues arose that we need to draw to the Committee s attention. Part B: Advice to the Committee

8 8 Part B: Advice to the Committee 5 Financial sustainability 5.1 In 2011/12 Tairāwhiti had total revenue of $ million (2010/11: $ million) and reported a surplus of $25,000, (2010/11: a deficit of $3.241 million) Tairāwhiti has forecast to break-even for the next three years with planned surpluses of: 8 $36,000 in 2012/13 $31,000 in 2013/14 $56,000 in 2014/ The DHB aims to live within its means through initiatives to improve productivity, increase efficiency and contain costs. For example in 2011/12 the DHB reduced costs on operating theatre consumables (disposable items) by $800, In the 2012/13 Annual Plan the DHB outlines performance improvement actions and cost saving targets for four objectives: 10 tighter cost control (through HBL and Midland region shared services and Tairāwhiti s savings plan); purchasing and productivity improvement (e.g. theatre productivity and reviewing all funding agreements); service reconfiguration (e.g. locality planning, reviewing mental health services and savings on pharmacy dispensing costs); and procurement savings initiatives (reduced air ambulance costs and All of Government procurement savings). 5.5 The Committee may wish to ask for an update on the DHB s financial performance and its cost containment initiatives: The Committee notes that Tairāwhiti achieved a break-even financial result in 2011/12 (reporting a surplus of $25,000). We also note that the DHB has forecast to breakeven in each of the three years from 2012/13 to 2014/15. Please provide an update on financial performance to date, including whether the DHB expects to achieve break-even in 2012/13. What are the main risks to Tairāwhiti s medium and long-term financial sustainability, and how are these being managed? Please provide a progress report on Tairāwhiti s plan (set out on page 86 of the 2012/13 Annual Plan) to contain costs in 2012/13. What opportunities are there for further efficiencies and cost savings? Tairāwhiti, Annual Report for the year ended 30 June 2012, page 89. Tairāwhiti DHB, Annual Plan 2012/13 & Statement of Intent 2012/15, page 129. Tairāwhiti, Annual Report for the year ended 30 June 2012, page 17. Tairāwhiti DHB, Annual Plan 2012/13 & Statement of Intent 2012/15, page 86.

9 5.6 A seismic evaluation of the DHB s buildings in 2012 identified issues with some of the DHB s older buildings and resulted in the decision to exit the Morris Adair Building and relocate staff The Committee may wish to ask for an update on the seismic evaluation and potential impacts : Please provide an update on the 2012 seismic evaluation of the DHB buildings, including any impact on services, potential costs and how they will be paid for. What decisions have been about the future of the Morris Adair building? Shared services 5.8 Tairāwhiti, like other DHBs, is focusing on regional collaboration (e.g. through HealthShare Limited) and national initiatives (e.g. led by Health Benefits Limited) to drive efficiencies and costs savings. 5.9 HealthShare Limited, the Midland region shared services agency, supports back office functions, strategic planning and implementation. HealthShare is also increasing its activities in a number of areas including regional information systems, internal audit and staff recruitment Health Benefits Limited (HBL) is tasked with achieving savings with DHBs of $700 million over its first five years. HBL s first major project is to implement a Finance, Procurement and Supply Chain (FPSC) shared system and services for all DHBs over the next 2 to 3 years. The project has a cost of about $89 million (to be paid for by the DHBs) and involves significant change for the sector and how it operates Tairāwhiti is scheduled to transition to the FPSC system at the end of The Committee may wish to ask about the main costs and benefits for Tairāwhiti from regional and national shared service initiatives: Please outline the main costs and benefits to Tairāwhiti from regional and national shared service initiatives, including those led by HealthShare Limited and Health Benefits Limited. What are the main risks to effective implementation and how is Tairāwhiti managing them? 6 Clinical sustainability 6.1 Tairāwhiti s small size, geographical isolation and population demographics contribute to the DHB s clinical and financial challenges. 6.2 Tairāwhiti is taking both a regional and local approach to developing more integrated health services, to improve access, quality, user satisfaction and efficiency. 13 For example during 2011/12 the DHB commissioned a purpose built mobile clinic to improve rural services in the district Tairāwhiti, Annual Report for the year ended 30 June 2012, page 40. HealthShare Limited, Annual Report 2012, page 4. Tairāwhiti, Annual Report for the year ended 30 June 2012, page 27. Tairāwhiti, Annual Report for the year ended 30 June 2012, page 13.

10 The Committee may wish to ask: How is Tairāwhiti measuring the impact of the mobile clinic on improving health outcomes? Regional tertiary services 6.4 The Midland Regional Services Plan 2012/13 (the RSP) focuses on how the region can work together to support vulnerable services and improve equity of access and health outcomes across the region as a whole In 2010 Tairāwhiti reviewed its tertiary cancer treatment services and in early 2011 it decided to shift its tertiary cancer treatment services from MidCentral DHB to Waikato DHB. Services are expected to be fully transitioned to Waikato from 1 July The Committee may wish to ask about the transition of tertiary cancer services: The Committee notes that Tairāwhiti is shifting its tertiary cancer treatment services from MidCentral DHB to Waikato DHB, to be completed by 1 July Please provide an update on the transition including, the costs and benefits of the shift, and the impact on patients, and their families. 6.7 Tairāwhiti is also reviewing whether it will shift its tertiary mental health services from Capital and Coast DHB to Waikato DHB The Committee may wish to ask for an update on the review of tertiary mental health services: Please provide an update on the review of where tertiary mental health services are provided for Tairāwhiti patients. Reducing disparities in health status 6.9 Nearly 48% of Tairāwhiti s population identify as Māori compared to 15.4% for New Zealand as a whole. Socioeconomic and health indicators for the Tairāwhiti population show significant disparities for Māori Tairāwhiti s Māori Health Plan sets out its priorities and targets to improve Māori health The Committee may wish to ask: What are the main opportunities for Tairāwhiti, at a district and regional level, to improve Māori health outcomes? What are the main barriers and how are these being addressed? Midland District Health Boards, Regional Services Plan 2012/13, page 9. Tairāwhiti, Annual Report for the year ended 30 June 2012, page 19. Tairāwhiti DHB, Annual Plan 2012/13 & Statement of Intent 2012/15, page 127. Tairāwhiti DHB, Annual Plan 2012/13 & Statement of Intent 2012/15, pages 15 to 16.

11 Air ambulance The Midland Region Transport and Accommodation project started in May As part of the project Tairāwhiti undertook a contestable process for its air ambulance service because of significantly increased costs for the service The DHB entered a new agreement to lease flights out of Gisborne, whereas previously the service had been based out of Napier. The new arrangement is expected to improve services (e.g. by eliminating the extra dead leg from and to Napier) and to save costs The Committee may wish to ask about the costs and benefits from the new air ambulance service arrangement: Please provide an update on the expected costs and benefits of the new air ambulance arrangements. Locality planning 6.15 In May 2012 the DHB started a Locality Planning process to develop more integrated services through partnership with primary care The purpose of the plan is to identify population health needs and match them to future clinical services and infrastructure. The plan is expected to be used to inform the design of clinical services locally and as a vehicle for transforming clinical practice The Committee may wish to ask for a progress report on Locality Planning: Please provide an update on Tairāwhiti s Locality Planning, including: how and when the DHB will develop more integrated primary care services; and the expected costs and benefits. 7 Rheumatic fever 7.1 One of the Government s 10 key results areas for the public sector to achieve over the next five years is to increase immunisation rates and reduce the incidence of rheumatic fever The incidence of rheumatic fever is ten times higher for people in Tairāwhiti than the rest of New Zealand The Rheumatic Fever Prevention Programme in Tairāwhiti was launched in early The DHB has partnered with Turanga Health and Ngati Porou Hauora to provide throat swabbing services through schools and antibiotic treatment in an effort to reduce the rate of acute rheumatic fever in Tairāwhiti The Committee may wish to ask for an update on the Rheumatic Fever Prevention Programme: Tairāwhiti, Annual Report for the year ended 30 June 2012, page 19. Tairāwhiti, Annual Report for the year ended 30 June 2012, page Tairāwhiti, Annual Report for the year ended 30 June 2012, page 16.

12 12 Please provide an update on the Rheumatic Fever Prevention Programme, including early results, what s worked well, and the main barriers to success and how they are being addressed. 8 Health targets 8.1 Copies of the 2011/12 Quarter Four, and the 2012/13 Quarter Two, results for the six national health targets are attached as Appendix Two. 2011/12 results 8.2 In 2011/12 (Quarter Four) Tairāwhiti achieved or exceeded four of the six targets, including 95% of two year olds being fully immunised (target of 95%). 8.3 The results show that Tairāwhiti s performance was below the target in the following: 90% of hospitalised smokers (target 95%) were offered help to quit (16 th equal of the 20 DHBs); and 50% of the eligible population (target 60%) had heart and diabetes checks (13 th equal). 2012/13 results 8.4 The latest results, for the second quarter in 2012/13, show that Tairāwhiti met two of the targets as 96% of patients (target 95%) had shorter stays in emergency departments and all patients met the shorter wait for cancer treatment target. 8.5 The results also show that, although still below target, Tairāwhiti improved its performance in two of the other targets: 93% of smokers (target 95%) were offered support to quit (14 th ). The target for 2012/13 has been changed as primary care data is now included with hospital data; and 59% of the eligible population (target 75%) had heart and diabetes checks (10 th ). 8.6 Tairāwhiti was 20 th of all DHBs for the other two targets: providing improved access to elective surgery (93% against a target of 100%); and 81% of eight-month olds (target 95%) were immunised (the target changed from targeting two year olds in 2011/12 to targeting eight-month olds). 8.7 The Committee may wish to ask: The Committee notes the results of the national health targets for Quarter Four of 2011/12 and Quarter Two of 2012/13. What were the reasons for the drop in access to elective surgery for Tairāwhiti patients and what is the DHB doing to improve access? What is Tairāwhiti doing to increase immunisation rates for eight-month olds?

13 APPENDIX ONE Explanation of scope and grades Management Control Environment Financial Information Systems and Controls Service Performance Information and Associated Systems and Controls Indicative Areas This is the foundation of the control environment and may include consideration of the following: clarity of strategic planning/the way the entity manages and reports performance; communication and enforcement of integrity and ethical values; commitment to competence; participation by those charged with governance for example, the involvement and influence of Audit Committee and Board (or equivalent); management philosophy and operating style; organisational structure; assignment of authority and responsibility; human resources policies and practices; risk assessment and risk management; key entity-level control policies and procedures; information systems and communication (including information technology planning and decision-making); monitoring; and legislative compliance arrangements. These are the systems and controls (including application-level computer controls) over financial performance and financial reporting and include the following: appropriateness of information provided; presentation of financial information; reliability of systems; control activity (including process-level policies and procedures); and monitoring. This concerns the quality of the service performance measures selected for reporting against, as well as the systems and controls (including application-level computer controls) over service performance reporting, and includes the following: appropriateness of information provided and reported; presentation of SSP information; reliability of systems; control activity (including process-level policies and procedures); and monitoring. Comments and grades are based on conclusions drawn from the SOI and the 2011/12 SSP. 13

14 14 Grade Explanation of grade Very good Good Needs improvement Poor No improvements are necessary. Improvements would be beneficial and we recommend that the Tairāwhiti DHB address these. Improvements are necessary and we recommend that the Tairāwhiti DHB address these at the earliest reasonable opportunity. Major improvements are required, and we recommend the Tairāwhiti DHB urgently address these. 1. The reporting under Part A of this briefing, Environment, Systems, and Controls for Measuring Financial and Service Performance, is a by-product of the underlying audit work carried out to form an opinion on the financial and service performance statements. Its scope is limited to those areas of the management control environment, information systems, and controls the auditor has given attention to during the course of the audit. 2. Recommendations for improvement are generally limited to those findings that the auditor considers are the more notable weaknesses in the design or operation of the management control environment, information systems, or controls. The recommended improvements determine the grade assigned. A single, serious deficiency drawing a recommendation for improvement may, of itself, determine the grade. Similarly, the most serious deficiency among several will draw a stronger recommendation and affect the grade accordingly. 3. Deficiencies in the management control environment, information systems, or controls are the gaps between what auditors observe and what auditors consider, in their professional judgement, constitutes best practice (see below). Auditors professional judgement is informed by many factors, including national and international standards, knowledge of best practice, and standards and expectations for the public sector in New Zealand. 4. To help ensure the relevance to all entities of the auditor s recommendations and grading, the auditor s recommendations are made with reference to what is considered best practice given the size, nature, and complexity of the entity. Thus, notions of best practice will vary among entities because what is considered necessary, sufficient, or beneficial for some entities may not be so for others. There is therefore not a one size fits all standard across the public sector. Rather, recommendations for improvement are based on the auditor s assessment of how far short the entity is from a standard that is appropriate for the entity s size, nature, and complexity of its business. 5. Further, notions of best practice may vary over time in response to change for example, changes in the operating environment, changes to standards, and changes in general expectations. Grades assigned to entities may therefore fluctuate from year to year according to how entities respond to changes in the environment and in best-practice expectations. Grades may also be affected from year to year because of changes in emphases, in accordance with the auditor s risk-based approach to testing systems and controls. 6. Improvements are recommended only when it is considered, in the auditor s judgement, that the benefits of the improvements would justify the costs. 7. Recommendations for improvement are based on the auditor s conclusions about the state of the entity s management control environment, information systems, and controls as at the end of the financial year.

15 APPENDIX TWO 15 15

16 APPENDIX TWO 16 16