The Annual Audit Letter for Devon Partnership NHS Trust

Transcription

1 The Annual Audit Letter for Devon Partnership NHS Trust. Year ended 31 March July 2016 Elizabeth Cave Director T E liz.a.cave@uk.gt.com Mark Bartlett Manager T E mark.bartlett@uk.gt.com Sophie Morgan Executive T E sophie.j.morgan@uk.gt.com 2016 Grant Thornton UK LLP The Annual Audit Letter for Devon Partnership NHS Trust July 2016

2 Contents Section Page 1. Executive summary 3 2. Audit of the accounts 5 3. Value for Money conclusion 8 4. Quality Accounts Working with the Trust Grant Thornton in Health 14 Appendices A Reports issued and fees Grant Thornton UK LLP The Annual Audit Letter for Devon Partnership NHS Trust July

3 Executive summary Purpose of this letter Our Annual Audit Letter (Letter) summarises the key findings arising from the work that we have carried out at Devon Partnership NHS Trust (the Trust) for the year ended 31 March This Letter is intended to provide a commentary on the results of our work to the Trust and its external stakeholders, and to highlight issues that we wish to draw to the attention of the public. In preparing this letter, we have followed the National Audit Office (NAO)'s Code of Audit Practice and Auditor Guidance Note (AGN) 07 'Auditor Reporting'. We reported the detailed findings from our audit work to the Trust's Board as those charged with governance in our Audit Findings Report on 31 May Our responsibilities We have carried out our audit in accordance with the NAO's Code of Audit Practice, which reflects the requirements of the Local Audit and Accountability Act 2014 (the Act). Our key responsibilities are to: give an opinion on the Trust's financial statements (section two) assess the Trust's arrangements for securing economy, efficiency and effectiveness in its use of resources (the value for money conclusion) (section three). Our work Financial statements opinion We gave an unqualified opinion on the Trust's financial statements on 1 June Value for money conclusion We were satisfied that the Trust put in place proper arrangements to ensure economy, efficiency and effectiveness in its use of resources. We reflected this in our report on the financial statements on 1 June Use of statutory powers We did not identify any matters which required us to exercise our additional statutory powers. Certificate We certify that we have completed the audit of the accounts of Devon Partnership NHS Trust in accordance with the requirements of the Code of Audit Practice. In our audit of the Trust's financial statements, we comply with International Standards on Auditing (UK and Ireland) (ISAs) and other guidance issued by the NAO Grant Thornton UK LLP The Annual Audit Letter for Devon Partnership NHS Trust July

4 Quality Accounts We completed a review of the Trust's Quality Account and issued our report on this on 27 June We concluded that the Quality Account and the indicators we reviewed were prepared in line with the Regulations and guidance. Working with the Trust During the year we have delivered a number of successful outcomes with you: An efficient audit we delivered an efficient audit with you in May, delivering and signing off the accounts the day after the Board meeting, one day before the deadline. Improved financial processes we worked with you to improve the controls in place for journal authorisation and for fixed assets Understanding your operational health through the value for money conclusion we provided you with assurance on your operational effectiveness. Improving your annual reporting we benchmarked your annual report to inform your preparation of the 2015/16 Annual Report Providing assurance over data quality we provided assurance over two key indicators and highlighted the need to improve the reliability of data regarding the patient safety indicator Sharing our insight we provided regular audit committee updates covering best practice and sector developments. We also shared our thought leadership reports Providing training we provided your teams with training on financial accounts and annual reporting Further details are set out on page 11. We would like to record our appreciation for the assistance and co-operation provided to us during our audit by the Trust's staff. Grant Thornton UK LLP July Grant Thornton UK LLP The Annual Audit Letter for Devon Partnership NHS Trust July

5 Audit of the accounts Our audit approach Materiality In our audit of the Trust's financial statements, we use the concept of materiality to determine the nature, timing and extent of our work, and in evaluating the results of our work. We define materiality as the size of the misstatement in the financial statements that would lead a reasonably knowledgeable person to change or influence their economic decisions. We determined materiality for our audit of the Trust's accounts to be 2.6m, which is 2% of the Trust's gross revenue expenditure. We used this benchmark as in our view, users of the Trust's financial statements are most interested in where it has spent the income it made in the year. We also set a lower level of specific materiality for certain areas such as losses and special payments, senior officer remuneration and auditor's remuneration. We set a lower threshold of 130,000, above which we reported errors to the Those Charged With Governance in our Audit Findings Report. The scope of our audit Our audit involves obtaining enough evidence about the amounts and disclosures in the financial statements to give reasonable assurance that they are free from material misstatement, whether caused by fraud or error. This includes assessing whether: the Trust's accounting policies are appropriate, have been consistently applied and adequately disclosed; significant accounting estimates made by management are reasonable; and the overall presentation of the financial statements gives a true and fair view. We also read the annual report to check it is consistent with our understanding of the Trust and with the accounts on which we give our opinion. We carry out our audit in line with ISAs (UK and Ireland) and the NAO Code of Audit Practice. We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit approach was based on a thorough understanding of the Trust's business and is risk based. We identified key risks and set out overleaf the work we performed in response to these risks and the results of this work Grant Thornton UK LLP The Annual Audit Letter for Devon Partnership NHS Trust July

6 Audit of the accounts These are the risks which had the greatest impact on our overall strategy and where we focused more of our work. Risks identified in our audit plan Journal entries Journals are the main way that expenditure and income can be moved around the general ledger, they represent the highest risk area for error, manipulation of the accounts and management override of controls. Journal controls are a key element of the system of internal control and are fundamental to an effective accounting system. After considering a report on journal controls the Audit Committee agreed in Autumn 2015 to remove the need for signing individual journals. Occurrence of healthcare income The Trust receives 76% of its income from NHS commissioners of healthcare services. The Trust invoices these commissioners throughout the year and accrues for activity in the final quarter of the year. Invoices for this final quarter cost per case activity and CQUIN are not agreed until after the accounts are produced for audit. There is therefore a risk that income from healthcare may be overstated. How we responded to the risk As part of our audit work we have: Gained an understanding of the Trust's system over journal entries Carried out a walkthrough of the key controls to assess the whether those controls are designed effectively Reviewed and tested journal entry policies Undertaken substantive testing of journal entries Reviewed any unusual significant transactions We identified the following issues to report relation to this risk: In our view the Trust's existing management controls did not provide sufficient control over journals and they are not evidenced journal entries totalling 11.2m did not have a description on the general ledger. Further review identified that many of these journals were routine cash and bank journals and narrative had been included in the invoice reference field in error. In total 66 journal entries had no description or narrative. We tested 27 journals totalling 9.9m that were non routine and considered unusual. Our testing confirmed that the journals were correct. We made the following recommendations in the Audit Findings Report: The Trust should introduce a process for authorising journals The Trust should implement changes to its procedures to ensure that all journals have descriptions. The Trust agreed to put in place a control where retrospective approval of journals above a certain threshold was carried out as part of the month end close down process As part of our audit work we have: Evaluated the Trust's policy for accounting for income for appropriateness and consistency with last year. Gained an understanding of the Trust's system for accounting for healthcare income and the controls in place Reviewed significant contracts with commissioning bodies to the supporting documentation. Tested NHS income through review of NHS Agreement of balances tool Reviewed any significant accounting estimates, contractual adjustments and accrued healthcare income We did not identify any issues to report in relation to this risk 2016 Grant Thornton UK LLP The Annual Audit Letter for Devon Partnership NHS Trust July

7 Audit of the accounts Audit opinion We gave an unqualified opinion on the Trust's financial statements on 1 June 2016, in advance of the national deadline. We received draft financial statements and the majority of the working papers at the commencement of our work. The Trust has introduced an index of working papers which has improved the process. We noted some examples of working papers that were not the final version, but overall the timeliness of the working papers was an improvement on last year. Annual Governance Statement and Annual Report We are also required to review the Trust's Annual Governance Statement and Annual Report. It provided these on a timely basis with the draft accounts with supporting evidence. We were satisfied that they met the DH Group Manual for Accounts and were consistent with the audited financial statements. Other statutory duties We did not identify any issues that required us to apply our statutory powers and duties under the Act. Issues arising from the audit of the accounts We reported the key issues from our audit to the Trust's Board on 31 May The key message arising from our audit of the Trust's financial statements was: the audit of journals was particularly time consuming because of slower responses from the management accounts team and difficulties extracting the journal population partly due to a change in the process we used. Whilst we worked together to resolve the issue it did cause some delays. We identified that journals are being posted without description and remain concerned that the lack of journal authorisation control is a significant internal control deficiency Grant Thornton UK LLP The Annual Audit Letter for Devon Partnership NHS Trust July

8 Value for Money conclusion Background We carried out our review in accordance with the NAO Code of Audit Practice, following the guidance issued by the NAO in November 2015 which specified the criterion for auditors to evaluate: In all significant respects, the audited body takes properly informed decisions and deploys resources to achieve planned and sustainable outcomes for taxpayers and local people. Overall VfM conclusion We are satisfied that in all significant respects the Trust put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ending 31 March Key findings Our first step in carrying out our work was to perform a risk assessment and identify the key risks where we concentrated our work. The key risks we identified and the work we performed are set out in the table below and overleaf. As part of our Audit Findings Report agreed with the Trust in May 2016, we agreed recommendations to address our findings. Risk identified Work carried out Findings and conclusions Financial sustainability Continuing to set a balanced budget is a significant challenge for the Trust when it is operating within the challenged Devon health economy under the Success Regime, and has ambitious plans for the future. We reviewed the Trust s latest Medium Term Financial Plan (MTFP), considered what has changed from the previous version and whether the assumptions in the MTFP have been subject to robust challenge. We also considered the Trust's CIP arrangements. Our review found that key changes between the latest MTFP and the previous version were well supported. Forecasting in monthly finance reports is generally accurate with the exception of the level of agency spend, where for modelling purposes the Trust assumes that these posts will be substantively replaced. The Trust holds a separate contingency to cover an increase costs as a result of agency usage. The Trust performed well in its CIP savings for 2015/16, although the level of non-recurrent savings was high at 34%. We concluded that while the Trust's MTFP remains challenging, the arrangements for updating the MTFP are sound and the assumptions are subject to robust challenge. The Trust's CIP plans for 2016/17 are challenging but a detailed plan is in place Grant Thornton UK LLP The Annual Audit Letter for Devon Partnership NHS Trust July

9 Value for Money conclusion Risk identified Work carried out Findings and conclusions Agency staff The Trust s spend on agency staff continues to be high, with the Trust at risk of exceeding the cap imposed by NHS England SMART recovery SMART recovery is a challenging transformational programme which brings risks that require careful management. We reviewed the Trust's continuing reliance on agency and bank staff and the progress being made to address the issue. We will consider the progress made by the Trust on the implementation of this programme.. The Trust's reliance on agency and bank staff continued to be a pressure in 2015/16, with the cap breached in months 11 and 12. The Trust has set up an Agency Reduction Group, which has created a number of strategic and operational plans to achieve the reductions in agency spend required in 2016/17. The Trust is also part of the success regime which has agency reduction as one of its work streams. The Trust has a target of reducing agency spend by 2.2m as a result of success regime work. We concluded that reducing the level of agency spend to the required level in is a significant risk for the Trust. The cap for 2016/17 is 4m, which would mean the Trust reducing agency spend by 43% in 2016/17 from 2015/16 levels. The Trust has brought into a single robust strategy all the agency controls. We found that the Trust has established clear risk management processes around the SMART recovery programme including regular reporting to the Board. There is a Programme Management Board in place with regular reporting to Senior Management Board, Finance & Investment Committee and Quality & Assurance Committee. The SMART recovery project will continue to be a significant challenge for the Trust. Good progress has been made with the Wellbeing clinics in Torbay and Exeter now open, with the site of the North Devon clinic having been recently agreed. The project will continue to require careful monitoring with a key challenge being whether it achieves the associated CIPs targets, are these are critical to the Trust's future plans Grant Thornton UK LLP The Annual Audit Letter for Devon Partnership NHS Trust July

10 Quality Accounts The Quality Account The Quality Account is an annual report to the public from NHS Trusts about the quality of services they deliver. It allows Trust Boards and staff to show their commitment to continuous improvement of service quality, and to explain progress to the public. Scope of work We carry out an independent assurance engagement on the Trust's Quality Account, following Department of Health (DH) guidance. We give an opinion as to whether we have found anything from our work which leads us to believe that: the Quality Account is not prepared in line with the DH criteria; the Quality Account is not consistent with other documents specified in the DH guidance; and the two indicators in the Quality Account where we carry out detailed work are not compiled in line with the DH regulations and meet expected dimensions of data quality. Key messages Our work on your Quality Account is complete and we have issued an unqualified conclusion on your Quality Account. We confirmed that the Quality Account had been prepared in line with the requirements of the Regulations except that the request for comments from stakeholder organisations was two weeks late. We confirmed that the Quality Account was consistent with the sources specified in the Guidance. We confirmed that the commentary on indicators in the Quality Account was consistent with the reported outcomes Our testing of two indicators included in the Quality Account identified issues with the Trust's arrangements for the Patient Safety Indicator. Following the Trust reviewing and re-working the population for the indicator we re-tested and were able to conclude that the indicator was materially reasonably stated in accordance with the Regulations and six dimensions of data quality. Quality Account Indicator testing We tested the following indicators: Percentage of reported patient safety incidents (PSI) resulting in severe harm or death Percentage of patients on CPA followed up within seven days of discharge We reviewed the process used to collect data for the indicators. We checked that the indicators presented in the Quality Account reconciled to the underlying data. We then tested a sample of cases to check the accuracy, completeness, timeliness, validity, relevance and reliability of the data, and whether the calculation is in accordance with the definition. We found no problems with the indicator on Percentage of patients on CPA followed up within seven days of discharge. For the indicator on percentage of reported patient safety incidents (PSI) resulting in severe harm or death our initial testing identified differences between the National system for recording indicators and the Trust's own system. These related to: - data not being resubmitted for 4 cases following a review which reduced their severity - 2 cases not uploaded to NRLS due to a medication name not being entered on the report. As these findings raised concerns over the population of the indicator, the Trust agreed to review and re-work the whole population. The Trust provided a revised analysis of the population and we tested a new sample of 40 cases Grant Thornton UK LLP The Annual Audit Letter for Devon Partnership NHS Trust July

11 Quality Accounts (continued) Our additional testing identified that there were 10 cases that were awaiting upload to NRLS due to an outstanding manager review or missing data. These cases were resolved by the conclusion of our work with 9 being ready to upload to NRLS and 1 confirmed as not being a reportable incident. Based on the results of our procedures, nothing came to our attention that caused us to believe that the indicators we tested were not reasonably stated in all material respects. The Trust has included the amended figures for this indicator in the final Quality Account. As the Trust was able to resolve all of the cases during the audit we have concluded that the indicator is reasonably stated in all material aspects. However, the errors we found in the original and revised samples has identified a weakness in the Trust's arrangements for this indicator. We have made a recommendation to the Trust in respect of the weakness being addressed. Conclusion As a result of this we issued an unqualified conclusion on your Quality Account Grant Thornton UK LLP The Annual Audit Letter for Devon Partnership NHS Trust July

12 Appendix A: Reports issued and fees We confirm below our final fees charged for the audit and provision of non-audit services. Fees Planned Actual fees 2014/15 fees Statutory audit 32,832 34,032* 43,776 Charitable fund independent examination 1,350 1,350 1,600 Total fees 34,182 34,182 45,376 Fees for other services Service Fees Audit related services Assurance on your Quality Account 13,098* Non audit related services Nil * This includes an additional audit fee of 1,200 in respect of additional time incurred on the audit as a result of difficulties in obtaining information. This is subject to approval from PSAA ** This includes an additional fee of 3,098 in respect of the additional work that was necessary due to the problems with the Patient Safety Indicator. This is subject to PSAA approval Reports issued Report Date issued Audit Plan March 2016 Audit Findings Report May 2016 Annual Audit Letter July Grant Thornton UK LLP The Annual Audit Letter for Devon Partnership NHS Trust July

13 2016 Grant Thornton UK LLP The Annual Audit Letter for Devon Partnership NHS Trust July 2016