MINUTES OF THE AUDIT COMMITTEE MEETING

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MINUTES OF THE AUDIT COMMITTEE MEETING Powered By Docstoc
					                   MINUTES OF THE AUDIT COMMITTEE MEETING
           HELD ON THURSDAY 13 JUNE 2008 IN THE CONFERENCE ROOM,
               1 ARMSTRONG WAY, SOUTHALL, MIDDLESEX UB2 4SA


Present:      Mr P Young                    -       Non-Executive Director, Chair of Committee
              Dr P Birdseye                 -       Non-Executive Director
              Mr A Maherali                 -       Non-Executive Director
              Mr P Portwood                 -       Non-Executive Director
              Dr C Whalley                  -       Non-Executive Director

In attendance:
             Mr R Creighton                 -       Chief Executive
             Mr N Curtiss                   -       Director of Corporate Governance
             Mr D Slegg                     -       Director of Finance and Shared
             Ms L Palacios                  -       Local Counter Fraud Service (LCFS) (South
                                                    Coast Audit)
              Ms C Mounfield                -       Audit Commission
              Mr P Cottle                   -       Audit Commission
              Ms L Davies                   -       RSM Bentley Jennison, Internal Auditors


ITEM        DISCUSSION                                                                   ACTION

1/06/08     APOLOGIES FOR ABSENCE

            Apologies for absence were received from Mr Tim Hughes, Non-
            Executive Director and Mr Kash Pandya, Audit Commission.

2/06/08     DECLARATION OF INTERESTS

            The following declaration of interest was made relating to the items on
            the agenda:

3/06/08     MINUTES OF THE MEETING HELD ON 17 APRIL 2008

            The minutes of the meeting held on 17 April 2008 were agreed as a
            correct record.

            Item 25/06/08

            Mr Philip Young, Audit Committee Chair reported that he was also
            Chair of the Trust Fund Committee.

            MATTERS ARISING

4/06/08     Audit Commission: Progress Report – November 2007 (Minute
            4/04/08 refers)

            Comprehensive area assessments – updates

            It was noted that the Audit Commission would be organising some
            updates on the introduction of the new Comprehensive Area
            Assessments (CAA). The current consultation on the CAA would be
            completed in July 2008. It was unlikely that any guidance would be
            available until the Autumn.



                                                1
ITEM      DISCUSSION                                                                 ACTION

          International Financial Reporting Standards (IFRS)

          The position concerning the implementation of the International
          Financial Reporting Standards (IFRS) was yet to be clarified. The
          Committee would be kept informed of developments.                          DS/ACM

          Shadow Accounts 2008/09

          It was noted that Shadow Accounts for 2008/09 would not be
          required.

5/06/08   Parkhill Internal Audit: West London Financial Services Agency –
          Progress Report 2007/08 (Minute 5/04/08 refers)

          It was noted that a ‘first-cut’ of the central register listing all the
          commercial contracts/leases entered into by the PCT and where they
          were stored had been prepared, but needed further work to ensure
          that it was complete and fully accurate.

          A report on progress would be made to the next meeting.                       NC

6/06/08   TJ: External Enquiry (Minute 6/04/08 refers)

          The Chief Executive reported that Price Waterhouse, which had been
          appointed by the London SHA to undertake the TJ enquiry would
          shortly be issuing the Trust with ‘extracts’ from the report relating to
          Ealing PCT, which the Trust could comment upon as well as review
          for factual accuracy.

          The Audit Committee would be kept informed of developments.                   RC

7/06/08   Parkhill Internal Audit: Ealing PCT – Progress Report (Minute
          8/04/08 refers)

          Payroll Provider Services – Ashford and St Peter’s Hospitals Payroll
          Bureau (ASP)

          The Trust had still not received the third party assurance statement
          from the Ashford and St Peter’s Hospital Payroll Bureau (ASP)
          internal auditors (Chancery Vellacot). It was agreed that the matter
          now needed to be escalated to a higher level. It was agreed that the
          Director of Finance and Director of Human Resources would raise this
          with their counterparts at the Ashford and St Peter’s NHS Trust.            DS/KK

          It was also noted that the Director of Human Resources and
          Development, Mr Kyriacos Kyriacou was actively working with a
          number of other PCTs and NHS organisations to tender for a suitable
          alternative payroll supplier. The Audit Committee would be kept
          informed of developments.                                                     KK

          HR Systems

          Members noted the update from the Director of Human Resources
          and Development, which had been circulated with the agenda and
          papers setting out the legal opinion that had been obtained from              KK
                                            2
ITEM      DISCUSSION                                                              ACTION

          Consult Gee on the level of risk to the Trust in having unsigned
          contracts of employment. Although noting the advice, Audit
          Committee Members felt it was important to obtain a written legal
          opinion on the matter.

          It was also felt that all outstanding unsigned contracts should be
          chased up and signed versions obtained. In addition, procedures
          should be put in place to ensure that new employees could not start
          working for the Trust until a signed contract was received by the
          Human Resources Directorate.                                               KK

8/06/08   Information Governance        Assurance     Programme      (Minutes
          25/04/08 refers)

          It was noted that further work was being undertaken to refine and
          assess patient identifiable data (PID) flows. A report on progress
          would be made to the next meeting.                                         NC

9/06/08   Outstanding Audit Committee Issues (Audit Committee paper
          08/06/13)

          Members RECEIVED Audit Committee paper 08/06/13, Outstanding
          Audit Committee Issues.

          The Audit Committee Chair explained that the list of issues had been
          prepared to ensure that there were no outstanding matters from the
          Audit Committee meetings held over the last 12 months.

          The list was reviewed by Members and the following outstanding
          points were highlighted:

          Disputed invoices

          Although the position concerning ‘disputed invoices’ for the purposes
          of calculating the payment deadline had not yet been resolved it was
          being discussed further with the External Auditors.                     DS/ACM

          Performance Management Committee

          It was noted that the Performance Management Committee did not
          report to the Audit Committee. It was essentially a management
          committee although chaired by a Non-Executive Director.

          Training for Audit Committee Members

          It was agreed that the options for developing an appropriate training
          programme to look at the role of the Audit Committee and Audit
          Committee Members in providing assurance to the Board on key
          governance issues and other related matters would be explored            NC/PY
          further.

          Both the External and Internal Auditors indicated at the meeting that
          they would be able to assist in the training.                           ACM/BJ



                                           3
ITEM       DISCUSSION                                                               ACTION

10/06/08   ANNUAL STATUTORY ACCOUNTS 2007/2008 (Audit Committee
           paper 08/06/1)

           The Trust Board at its meeting on 22 May 2008 (see Trust Board
           minute 10/05/08 formally delegated authority to the Audit Committee
           to approve and adopt the Annual Statutory Accounts on the Trust
           Board’s behalf to enable their formal submission to the Department of
           Health in line with the national timetable, subject to a report at the
           next appropriate Trust Board meeting.

           Prior to agreeing the Annual Statutory Accounts, the Audit Committee
           also considered in detail the External Auditor’s Annual Governance
           Report and approved the draft Representation Letter, the proposed
           Action Plan and the Value for Money Audit and ALE Audit Opinions
           (see Audit Committee minute 13/6/08 below).

           The External Auditors had issued an unqualified opinion on the
           Annual Statutory Accounts.

           The Audit Committee formally APPROVED and ADOPTED the
           Annual Statutory Accounts for the year ended 31 March 2008.

           A report would be made to the Trust Board at its meeting on 26 June
           2008.                                                                     DS/PY

           The Audit Committee Chair wished to have recorded his own and
           those of the Audit Committee’s thanks to the Finance Directorate and
           all those involved in producing the Annual Statutory Accounts and
           Statement of Internal Control (SIC) in line with the very demanding
           national timetable.

11/06/08   STATEMENT OF INTERNAL CONTROL (SIC) (Audit Committee
           paper 08/06/2)

           Members RECEIVED Audit Committee paper 08/06/2, Statement of
           Internal Control (SIC).

           The Audit Committee noted that the SIC had been written to reflect
           the Trust’s management arrangements and the processes which had
           been firmly embedded to manage risk. It would be signed by the Chief
           Executive as Accountable Officer on behalf of the full Trust Board and
           was based on the assurances which he and the Board had received
           from the various control mechanisms in place.

           It was noted that in support of the Trust’s Statement of Internal
           Control (SIC) a Head of Internal Audit Opinion (HOIA) ‘significant
           assurance’ opinion had been issued, and in relation to the Board
           Assurance Framework the Trust had been given a ‘full compliance’
           opinion that ‘an Assurance Framework has been established which is
           designed and operating to meet the requirements of the 2007/08
           Statement of Internal Control (SIC) and provides reasonable
           assurance that there is an effective system of internal control to
           manage the principal risks identified by the organisation’.



                                            4
ITEM       DISCUSSION                                                                 ACTION

           The Audit Committee APPROVED and ADOPTED the Statement of
           Internal Control (SIC) and authorised the Chief Executive to sign it off
           on behalf of the Trust Board.                                                   RC

12/06/08   EXTERNAL AUDIT: AUDIT COMMISSION – PROGRESS REPORT
           (Audit Committee paper 08/06/3)

           Members RECEIVED Audit Committee paper 08/06/3, External Audit:
           Audit Commission – Progress Report.

           Members NOTED the progress to date with achieving the 2007/08
           Audit Plan as set out in sections 3 and 4 of the report.

           The summary of the Audit Commission report on the impact of the
           National Fraud Initiative (NFI) 2006/07 was also NOTED. It was
           agreed that any of the lessons identified in the National Fraud
           Initiative (NFI) relating to the review of staff ineligible to work because
           of expired visas, or refused right of entry applications, which might be
           of use locally should be reviewed by the External Auditor and the
           Local Counter Fraud Service (LCFS).                                         ACM/LCFS

13/06/08   EXTERNAL  AUDIT:  AUDIT    COMMISSION      –    ANNUAL
           GOVERNANCE REPORT (Audit Committee paper 08/06/4)

           Members RECEIVED Audit Committee paper 08/06/4, External Audit:
           Audit Commission – Annual Governance Report.

           Ms Carol Mounfield, Audit Commission highlighted the main elements
           of the report which summarised the key findings from the 2007/08
           programme of audits.

           Ms Mounfield explained that work was still in progress, but based on
           the testing which had been undertaken and findings to date it was
           expected that an unqualified opinion on the financial statements would
           be issued.

           Particular attention was drawn to Table 1 in section 14 of the report
           which set out the areas of audit risk which had been identified at the
           start of planning the annual audit. The findings which had emerged
           from the various audits that had been undertaken indicated that these
           would not impact on the unqualified opinion to be issued on the
           financial statements.

           Attention was also focussed on the draft Management Representation
           Letter set out in Appendix 2. There were only two issues on which
           representations were sought relating to:

            the payroll system – interface discrepancies;
            valuation of assets used by the Local Authority;

           the auditors observed neither of which posed risks to their unqualified
           opinion.

           In addition, based on the Auditors Local Evaluation (ALE)
           assessment, the work on the ‘Better Commissioning’ review and the
                                             5
ITEM       DISCUSSION                                                                  ACTION

           Auditors’ overall knowledge on the workings of the Trust, the PCT had
           put in place adequate corporate arrangements for securing economy,
           efficiency and effectiveness in its use of resources for achieving Value
           for Money (VFM). The outcome of the ALE assessments and the
           Value for Money conclusion was set out in Appendix 4 of the report.

           With regard to the two Management Representations, the Director of
           Finance outlined the background to the problems with the payroll
           ledger system and the changes which would be instituted in 2008/09
           to avoid a similar recurrence, and the rationale for the way in which
           the properties used by the Local Authority were valued in the Trust’s
           accounts.

           It was agreed that details of the properties and their current use by the
           London Borough of Ealing would be circulated to Audit Committee
           Members.                                                                       DS

           Questions concerning the Annual Governance Report and the
           conclusions reached were answered by Ms Mounfield.

           In looking towards 2008/09 and the new Comprehensive Area
           Assessment (CAA) which would replace the ALE monitoring regime,
           Members discussed the relative merits of whether more management
           effort should be put into achieving higher assessment scores or
           concentrating on achieving the requirements of the new World Class
           Commissioning (WCC) regime which in itself should achieve high
           scores and result in excellence in commissioning.

           The Audit Committee NOTED the proposed unqualified opinion which
           the External Auditors were intending to give on the Trust’s Annual
           Accounts and Financial Statements.

           The Audit Committee APPROVED the Draft Management
           Representations Letter as set out in Appendix 2 and AUTHORISED
           the Director of Finance to sign it off on behalf of the Trust Board.           DS

           The Audit Committee Chair also thanked Ms Mounfield and the Audit
           Commission team for their hard work and diligence, efforts and
           impartiality in auditing and assessing the Trust’s performance.

14/06/08   EXTERNAL AUDIT: AUDIT COMMISSION – PAYMENT BY
           RESULTS DATA ASSURANCE FRAMEWORK CLINICAL CODING
           AUDIT AT EALING HOSPITAL NHS TRUST (Audit Committee
           paper 08/06/5)

           Members RECEIVED Audit Committee paper 08/06/5, External Audit:
           Audit Commission – Payments by Results Data Assurance
           Framework Clinical Coding Audit at Ealing Hospital NHS Trust.

           Ms Carol Mounfield, External Auditor explained that the report
           summarised the findings from the Clinical Coding Audit which had
           been undertaken at Ealing Hospital NHS Trust (EHT) in August 2007.
           The aim of the audit was to assess the accuracy of clinical coding in
           the areas that had been targeted and to support improvement in
           coding and associated arrangements.
                                             6
ITEM       DISCUSSION                                                                  ACTION

           The overall error rate for EHT’s Healthcare Resource Group (HRGs)
           was 8%, which was below the average of 12% highlighted in an
           earlier Audit Commission pilot study. The audit sample was, however,
           not statistically large enough to allow for an error rate to be
           extrapolated from it for auditing and accounting purposes. It was
           though helpful as being indicative of the financial impact of coding
           errors and for commissioning bodies to be able to gain an insight into
           the need to minimise coding inaccuracies.

           Questions concerning the report were answered by Ms Mounfield.

           The Audit Committee discussed the review findings and the obvious
           implications for commissioning budgets. It was acknowledged that this
           was an important area of performance that needed to be regularly
           scrutinised and monitored.

           It was agreed that the issue of the accuracy of clinical coding needed
           to be raised with EHT.                                                       JM/DS

           Although EHT had performed relatively well next to national
           benchmarked data, it was important to be made clear to EHT that it
           needed to take steps to improve its systems to minimise coding
           inaccuracy, and that this was an area which the PCT would monitor
           closely.

           In terms of the detailed and regular oversight of coding accuracy, it
           was agreed that the Performance Management Committee was the
           appropriate Committee within the Trust’s governance arrangements to
           undertake this task.                                                        JM/CW

           The report was NOTED.

15/06/08   RSM BENTLEY JENNISON INTERNAL AUDIT: EALING PCT AND
           WEST LONDON FINANCIAL SERVICES AGENCY – PROGRESS
           REPORT (Audit Committee paper 08/06/6)

           Members RECEIVED Audit Committee paper 08/06/6, RSM Bentley
           Jennison Internal Audit: Ealing PCT and West London Financial
           Services Agency – Progress Report.

           Ms Louise Davies, RSM Bentley Jennison highlighted the work to date
           with progressing the Internal Audit Plan as outlined in section 2 of the
           report.

           All audit reviews were currently in the process of being scoped and
           agreed with individual Corporate Directors – once finalised details
           would be circulated to the Audit Committee.                                    BJ

           Attention was also briefly focussed on the range of Key Performance
           Indicators (KPIs) for the Internal Audit service that were in the process
           of being agreed namely:

              Number of audits commenced on the agreed start dates;
              Total number of draft reports issued within 10 working days of the
               audit debrief;
                                             7
ITEM       DISCUSSION                                                                 ACTION

              Total number of management responses to draft reports received
               year to date;
              Number of management responses received within 10 working
               days of draft reports being issued;
              Number of final reports issued within 5 working days of receipt of
               management responses;
              Number of fundamental recommendations followed up within
               three months of the agreed completion date;
              90% of the Audit Plan to be delivered by 31 March 2009.

           Audit Committee Members felt that in finalising the KPIs it was
           important to agree a range of measure that were achievable and also
           reflected where delays had occurred – either from Internal Audit or the
           management side.

           It was also felt that a clear date needed to be established at the
           earliest opportunity for the statutory and mandatory training review.

           The report was NOTED.

16/06/08   LOCAL COUNTER FRAUD SPECIALIST SERVICE (LCFS) SOUTH
           COAST AUDIT – PROGRESS REPORT (Audit Committee paper
           08/06/7)

           Members RECEIVED Audit Committee 08/06/7, Local Counter Fraud
           Specialist Service (LCFS) South Coast Audit – Progress Report.

           Ms Lynn Palacios, Local Counter Fraud Service summarised the main
           elements of the report highlighting the individual investigations and
           pro-active reviews which had been initiated, as well as the training
           that had been undertaken locally. Questions concerning the report
           and the individual reviews were answered by Ms Palacios.

           Expenses review

           With regard to the delays with the Expenses Review it was agreed
           that the Director of Human Resources and Development needed to
           escalate the matter with his counterpart at the Ashford and St Peter’s
           NHS Trust (ASP) to ensure that the information was provided by the
           ASP payroll bureau as quickly as possible.                                  KK/DS

           Case 08/09 56

           The position concerning case 08/09 56 was reviewed. The Audit
           Committee agreed that the investigation should continue and that the
           outstanding payment should be pursued.

           However, in looking at this case Members also felt that a further report
           was needed at the next meeting to identify:

            what broader lessons could be learned in terms of due diligence
             and vetting of voluntary/third sector organisations prior to entering
             into a contractual relationship with them;
            the controls that are put in place once such organisations have
             been appointed to provide services for the PCT.
                                              8
ITEM       DISCUSSION                                                                 ACTION

           It was agreed that Stephen James, Head of Partnerships would attend
           the next meeting to provide further details on this particular case.        DS/SJ

           The report was NOTED.

17/06/08   IMPLICATIONS AND LESSONS TO BE LEARNT FROM THE
           INDEPENDENT REVIEW INTO THE CORPORATE GOVERNANCE
           AND FINANCIAL MANAGEMENT ARRANGEMENTS AT BRENT
           TEACHING PCT (Audit Committee paper 08/06/8)

           Members RECEIVED Audit Committee paper 08/06/8, Implications
           and Lessons to be Learnt from the Independent Review into the
           Corporate Governance and Financial Management Arrangements at
           Brent Teaching PCT.

           The review report had been published by the London SHA to ensure
           that lessons were learnt from the failings identified at Brent Teaching
           PCT and not repeated elsewhere in the NHS.

           The Audit Committee Chair reminded Members that it was agreed that
           the Audit Committee should review the recommendations or key
           themes that had emerged from the review, and provide the Board with
           the necessary assurance that a similar set of failings would not arise
           within the PCT’s management arrangements.

           Members acknowledged that the report which had been produced for
           the Committee provided a helpful and comprehensive assurance
           review on the arrangements within Ealing PCT, and how it was
           unlikely that similar problems would arise at Ealing PCT because of
           the different management arrangements and control mechanisms in
           place.

           In reviewing the report the following points were highlighted:

              in looking at future challenges and with the need to develop a
               greater degree of separation between commissioning and provider
               functions, it was important to ensure that there would be sufficient
               capacity within the Finance Directorate to cope with the increased
               workload and commitments that this would require;
              there needed to be good succession planning and arrangements
               for ensuring organisational memory and intelligence was
               preserved in whatever management changes were made.

           The Audit Committee NOTED the report and AGREED that it provided
           sufficient assurance for the Board on the management arrangements
           and controls prevailing within the Trust, which would make it unlikely
           that a similar set of problems as identified at Brent Teaching PCT
           would arise at Ealing PCT.

18/06/08   CORPORATE     ASSURANCE               FRAMEWORK        (CAF)     (Audit
           Committee paper 08/06/9)

           Members RECEIVED Audit Committee paper 08/06/9, Corporate
           Assurance Framework (CAF).

                                             9
ITEM       DISCUSSION                                                                ACTION

           The Audit Committee Chair reported that he would along with the
           Director of Corporate Governance be reviewing the current format of
           the CAF. Although the CAF met the key requirements of the relevant
           governing regulations and Department of Health guidance on what an
           ‘Assurance Framework’ needed to do, a way of producing a more
           streamlined reporting format for the Audit Committee which was
           focussed on a limited number of top key corporate objectives would
           be explored.

           A report on progress would be made to the next meeting.                    PY/NC

           The Audit Committee NOTED the content of the current version of the
           CAF and the various assurances and controls in place relating to the
           work of the Trust.

19/06/08   AUDIT COMMITTEE – CHAIR’S REPORT

           The Audit Committee Chair reported on the various activities that he
           had been involved in related to the work of the Committee.

           The report was NOTED.

20/06/08   ANNUAL REVIEW OF STANDING ORDERS AND STANDING
           FINANCIAL INSTRUCTIONS (SOs/SFIs)

           The Director of Corporate Governance reported that he had
           completed the review of the current Standing Orders and Standing
           Financial Instructions (SOs/SFIs). The Internal Auditors and the Local
           Counter Fraud Service (LCFS) confirmed that they did not have any
           significant changes. A number of minor changes would need to be
           made to incorporate references to reflect new legislation which would
           affect the work of the Trust such as the Health Act 2006. A revised set      NC
           would be produced in due course.

           It was acknowledged that in addition, as a quite separate task the
           Scheme of Delegation would also need to be amended to reflect
           whatever delegated authority the Trust Board passed to the Provider
           Services Committee as part of its programme to establish a greater
           degree of commissioning/provider separation.

           The report was NOTED.

21/06/08   REQUEST FOR WAIVER REGARDING YOUNG PEOPLE’S DRUG
           TREATMENT SERVICE TENDER (Audit Committee paper
           08/06/10)

           Members RECEIVED Audit Committee paper 08/06/10, Request for
           Waiver regarding Young People’s Drug Treatment Service Tender.

           In reviewing the request Members felt that they did not have sufficient
           information on which to base a decision. It was AGREED that
           authority be delegated to the Director of Finance and Audit Committee
           Chair to investigate and take such action as appropriate to resolve the
           matter and if necessary approve the waiver outside of the meeting.         DS/PY


                                            10
ITEM       DISCUSSION                                                                 ACTION

           In looking at the issues raised Members felt it was important that there
           were appropriate processes in place for managing and monitoring
           arrangements with voluntary/third sector providers (see overlap with
           minute 16/06/08 and the reference to case 08/09/ 56 above), and that
           the issue should be reviewed at the next meeting.                             DS

22/06/08   INFORMATION ITEMS (Audit Committee paper 08/06/11)

           Members RECEIVED and NOTED the following items for information:
           - Unconfirmed Clinical and Organisational Governance (COG)
             minutes of the meeting held on 8 February 2008
           - Draft Trust Fund Committee minutes of the meeting held on 15 May
             2008

23/06/08   PCT OPERATIONAL RISK REGISTER – JUNE 2008 (Audit
           Committee paper 08/06/11)

           Members RECEIVED Audit Committee paper 08/06/11, PCT
           Operational Risk Register – June 2008.

           The Committee NOTED the latest version of the Operational Risk
           Register which highlighted the range of risks faces the Trust, and the
           assurance and control measures that were in place to minimise the
           risks that were identified.

24/06/08   INFORMATION GOVERNANCE COMMITTEE MINUTES OF THE
           MEETING HELD ON 25 MARCH 2008 (Audit Committee 08/06/12)

           Members      RECEIVED      and    NOTED    the  contents   and
           recommendations of the Information Governance Committee minutes
           of the meeting held on 25 March 2008.

           OTHER BUSINESS

25/06/08   Charitable Funds – Provision of Audit Services (Audit Committee
           paper 08/06/13)

           Members RECEIVED Audit Committee paper 08/06/13, Charitable
           Funds – Provision of Audit Services.

           The Committee noted the recommendations set out in the concluding
           paragraph of the report and AGREED that in the light of the guidance
           from the Charity Commission for England and Wales that an
           independent examination of the Trust Funds would be acceptable as
           opposed to a full audit.                                                    DS/PY

           The recommendation would be brought to the attention of the Trust             NC
           Board.

26/06/08   DATE OF NEXT MEETING

           Thursday 13 November 2008 at 9.30am in the Conference at
           Armstrong Way.



                                            11

				
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