The Annual Audit Letter for Staffordshire and Stoke on Trent Partnership NHS Trust

Transcription

1 The Annual Audit Letter for Staffordshire and Stoke on Trent Partnership NHS Trust Year ended 31 March July 2016 James Cook Director T E james.a.cook@uk.gt.com Andrew Reid Senior Manager T E andrew.s.reid@uk.gt.com Phil Wood Executive T E philip.wood@uk.gt.com 2016 Grant Thornton UK LLP The Annual Audit Letter for Staffordshire and Stoke on Trent Partnership NHS Trust 28 July 2016

2 Contents Section Page 1. Executive summary 3 2. Audit of the accounts 5 3. Value for Money conclusion 8 4. Working with the Trust 12 Appendices A Reports issued and fees 14 B Grant Thornton in Health Grant Thornton UK LLP The Annual Audit Letter for Staffordshire and Stoke on Trent Partnership NHS Trust 28 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 Staffordshire and Stoke on Trent 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'. Our work Financial statements opinion We gave an unqualified opinion on the Trust's financial statements on 25 May 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 25 May We reported the detailed findings from our audit work to the Trust's Audit Committee as those charged with governance in our Audit Findings Report on 20 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). 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 Staffordshire and Stoke on Trent Partnership NHS Trust 28 July

4 Consolidation template We also reported on the consistency of the consolidation schedules submitted to the Department of Health with the audited financial statements. We concluded that these were consistent. 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 Staffordshire and Stoke on Trent Partnership NHS Trust in accordance with the requirements of the Code of Audit Practice. Other work completed We completed a review of the Trust's Quality Account which we concluded in June We concluded that the Quality Account and the indicators we reviewed were prepared in line with the Regulations and guidance, and based on our experience of reviews of Quality Accounts for other NHS Trusts we provided feedback on areas which the Trust may need to consider to improve the clarity and value of the Quality Account in the future. 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 the accounts 7 days before the deadline, releasing your finance team for other work. Understanding your operational health through the value for money conclusion we provided you with assurance on your operational effectiveness. We highlighted a number of areas for you to consider, which related to: Relationships with commissioners - agreement of scope of contracts and funding for services to be provided Strengthening of the Trust's contracting team Implementation of Internal Audit recommendations consistency and rigour across the organisation Determining the future of the Adult Social Care contract Review and development of estates strategy. Providing assurance over data quality we carried out an independent review of your 2015/16 Quality Account and provided assurance over indicator information included Sharing our insight we provided regular audit committee updates covering best practice. We also shared examples of good practice based on our national research reports Supporting development a number of your Non Executive Directors (NEDs) have attended our regular network meetings in Birmingham, covering a range of topics including delivering Value for Money, Alternative Delivery Models in the NHS, Data Quality and Partnership Working. Support outside of the audit we have continued to provide you with support on a range of employment tax and VAT issues through our annual helpline arrangement and via access to our expert specialist staff. 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 Staffordshire and Stoke on Trent Partnership NHS Trust 28 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 6,504,000, which is 1.75% 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 cash and cash equivalents, senior officer remuneration, disclosure of auditors remuneration and related party transactions. We set a triviality threshold of 325,000, above which we reported errors to the Audit Committee 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 Staffordshire and Stoke on Trent Partnership NHS Trust 28 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 Financial support and going concern The Trust Directors have a reasonable expectation that the services provided by the Trust will continue for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. Occurrence of healthcare income The Trust receives 50% 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 activity are not agreed until after the accounts are produced for audit. There is therefore a risk that income from healthcare may be overstated. Accounting for Private Finance Initiative (PFI) scheme In In 2014/15 we identified non material differences between the figures produced by the Trust's financial model and those produced by Grant Thornton PFI models. How we responded to the risk As part of our audit work we: Reviewed the Trust's own assessment of whether it was appropriate to account on a going concern basis, and the Trust's disclosure in the accounts to ensure they gave sufficient information Reviewed the Trust's cash flow forecasts and correspondence with NHS Improvement about the financial support it received. We noted that: The Financial Planning and Budgets 2016/17 report as presented to the Trust Board on 20 May 2016 identified that the Trust could be at risk of reaching a negative cash position by November 2016 under current planning assumptions. The Trust has received a letter from NHS Improvement dated 18 May 2016 which confirms that it is reasonable to assume that the Department of Health will "make sufficient cash financing available to the organisation over the next 12 month period such that the organisation is able to fund all essential operational liabilities." On this basis the Board has concluded that it is appropriate to prepare the Trust's accounts on a going concern basis. Whilst the Trust's Financial Planning and Budgets 2016/17 report does highlight risks around the on-going financial position of the Trust, we concur that this assessment by the Board is reasonable. 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 Tested a sample of income to supporting documents and receipt of cash Checked the consistency of income recorded by the Trust against expenditure recorded by the commissioners. We did not identify any issues to report. We have reviewed the Trust's accounting for its Haywood PFI scheme and concluded that the figures included in the accounts are materially correct. The Trust has continue to use the same PFI model in 2015/16 as was used in 2014/15. As a consequence we have again identified non material differences between the figures produced by the Trust's financial model and those produced by Grant Thornton PFI models Grant Thornton UK LLP The Annual Audit Letter for Staffordshire and Stoke on Trent Partnership NHS Trust 28 July

7 Audit of the accounts Audit opinion We gave an unqualified opinion on the Trust's financial statements on 25 May 2016, one week in advance of the national deadline of 2 June Whilst this represents an early sign off compared to many other NHS Trusts, it was not as early as had been possible in previous years as the Trust's finance team was not as well prepared for the year end audit as it has been in previous years due to the absence of the Head of Financial Accounting due to sickness in early April and other key staff changes within the team during the year. However, we will continue to work closely with the Trust to ensure that continued early reporting to Audit Committee and sign off of the financial statements is achieved in future years. Issues arising from the audit of the accounts We reported the key issues from our audit to the Trusts Audit Committee on 20 May In common with many NHS bodies, the Trust has been under considerable financial pressure throughout 2015/16 which has led to an increased risk around its year end position. This was reflected in the audit work necessary to respond to this risk in areas such as review of the year end position on contracts with commissioners, bad debt provisions, accruals and other accounting estimates. 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 identified no issues in relation to the Annual Governance Statement of Annual Report. Whole of Government Accounts (WGA) We issued a group assurance certificate to the NAO in respect of Whole of Government Accounts, which did not identify any issues for the group auditor to consider other than the potential impact of contract arbitration differences on the agreement of balances position as noted above. Other statutory duties We are also required to refer certain matters to the Secretary of State under section 30 of the Local Audit and Accountability Act There were no matters identified during the course of our 2015/16 audit which we considered required such referral. No adjustments have been made to the accounts which impact on the Trust's retained surplus position of 604k. However, we have identified unadjusted misstatements and/or uncertainties with a total potential revenue impact of 2,205k relating primarily to the outcome of 2015/16 contract arbitration which was resolved after the draft accounts were prepared, or remaining unresolved differences on NHS agreement of balances. Adjusting for these items would reduce the Trust's retained surplus in the financial statements Grant Thornton UK LLP The Annual Audit Letter for Staffordshire and Stoke on Trent Partnership NHS Trust 28 July

8 Value for Money (VfM) 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 2. In Audit Findings report agreed with the Trust in May 2016, we identified the following areas for potential improvement which the Trust Management Team agreed to consider further: Relationships with commissioners - agreement of scope of contracts and funding for services to be provided Strengthening of the Trust's contracting team Implementation of Internal Audit recommendations consistency and rigour across the organisation Determining the future of the Adult Social Care contract beyond 2016/17 Review and development of estates strategy 2016 Grant Thornton UK LLP The Annual Audit Letter for Staffordshire and Stoke on Trent Partnership NHS Trust 28 July

9 Value for Money conclusion Table 2: Value for money risks Risk identified Work carried out Findings and conclusions Financial outturn The Trust delivered a surplus in 2015/16 of 0.6 million. This was in line with the "best case" forecast position as agreed with NHS Improvement during 2015/16 and as reported consistently to the Board throughout 2015/16 and is in excess of the stretch target set by NHS Improvement of 200k. We reviewed the Trust's arrangements for putting together and agreeing its budget, including identification of savings plans; and its arrangements for monitoring and managing delivery of its budget and savings plans for 2015/16, including the impact on service delivery. The Trust delivered the agreed surplus of 0.6m in 2015/16 but as had been reported to NHS Improvement and the Trust Board throughout the year, this was on a non-recurrent basis after allowing for the impact of a capital to revenue transfer of 4.7m and other non-recurrent items including 3.4m from review of unapplied direct payments to service users. The Trust has taken action in a number of other areas such as review of bad debt provision which have led to reductions in the scope for flexibility in future years. As a result the Trust remains in a position of an underlying recurrent deficit going in to 2016/17. The Trust delivered CIP savings of 9.142m in 2015/16 against a revised target of 9.9m however 3,181k of these savings were delivered on a non-recurrent basis. The Trust has experienced a number of difficulties in relation to agreement of its contracting position with commissioners and has had to enter in to arbitration and/or mediation in a number of areas. The most significant issue arising relates to an unadjusted misstatement with a value of 1.4m relating to a dispute with North Staffordshire CCG which was resolved after preparation of the draft accounts. This item would reduce the Trust's retained surplus were it to be adjusted in the financial statements Grant Thornton UK LLP The Annual Audit Letter for Staffordshire and Stoke on Trent Partnership NHS Trust 28 July

10 Value for Money conclusion Table 2: Value for money risks continued Risk identified Work carried out Findings and conclusions Financial sustainability The Trust has identified a significant savings gap resulting in a current forecast of a 6.2m deficit in 2016/17 which will need to be addressed on a recurrent basis to ensure financial sustainability of the Trust. Care Quality Commission (CQC) inspection An inspection report published by the Care Quality Commission in May 2016 based on an inspection visit undertaken in November CQC rated the Trust as "requires improvement" overall, with ratings in specific areas of: Are services safe? Requires Improvement Are services effective? Requires Improvement Are services caring? - Good Are services responsive? Requires improvement Are services well-led? Inadequate. We reviewed the Trust's arrangements for updating, agreeing and monitoring its savings plans, and for communicating key findings to the Finance, Investment and Performance Committee and Trust Board. We reviewed how the Trust is implementing and monitoring delivery of the action plan agreed to address the findings of the CQC inspection. The Financial Planning and Budgets 2016/17 report as presented to the Trust Board on 20 May 2016 reported a "best case" forecast deficit for 2016/17 of 6.1m as a consequence of a number of pressures including: CIP delivery The impact of wider financial pressures across the health economy on contracting relationships with CCGs This forecast position was based on a number of key assumptions: No loss of income in 2016/17 as a result of the National Disputes Resolution Process Transfer of bed based services to University Hospitals of North Midlands NHS Trust during 2016/17 A break even position on the s75 Adult Social Care contract with Staffordshire County Council No impact in 2016/17 from the outcome of 2015/16 contract arbitration or other unresolved differences on NHS agreement of balances as a 31 March Whilst incurring a 6.1m deficit in 2016/17 would push the Trust in to a cumulative deficit position for the first time, the Trust would only be in breach of its break even duty were it be unable to return to a cumulative break-even position by the end of 2018/19. We found that the Trust has established an action plan which was agreed with the CQC following the initial inspection visit in November The Trust reports regularly on progress to the Quality Governance Committee, with further updates to the Trust Board on a monthly basis. We are satisfied based on review of the CQC findings and the Trust's response to them that this would not impact on our VFM conclusion Grant Thornton UK LLP The Annual Audit Letter for Staffordshire and Stoke on Trent Partnership NHS Trust 28 July

11 Value for Money conclusion Table 2: Value for money risks continued Risk identified Work carried out Findings and conclusions Other non-significant risk areas Review of evidence of action taken by Trust Board in 2015/16 to clarify strategy on non-core services. Update on Trust's position on future of Adult Social Care contract. Review of development action taken on Board Assurance Framework, and assurances from Internal Audit on the effectiveness of the Board Assurance Framework. Assessment of evidence of progress in implementing Internal Audit recommendations Progress on development of estates, IT and workforce strategies.. Review latest information on use of agency staff. Review of evidence of outcomes on contract management. We reviewed evidence of Trust progress in these areas based on review of supporting documentation and discussion with relevant staff where appropriate. The Trust has taken action in 2015/16 to develop Strategic vision and objectives including development of Multi-Specialty Community Provider model Implementation of Internal Audit recommendations Risk management arrangements and the Board Assurance Framework reporting and governance arrangements (e.g. the Quality Dashboard) in the light of the Well Led Framework. However, we consider that further action is needed in relation to: Relationships with commissioners - agreement of scope of contracts and funding for services to be provided Strengthening of the Trust's contracting team Implementation of Internal Audit recommendations consistency and rigour across the organisation Determining the future of the Adult Social Care contract beyond 2016/17 Review and development of estates strategy Grant Thornton UK LLP The Annual Audit Letter for Staffordshire and Stoke on Trent Partnership NHS Trust 28 July

12 Working with the Trust Our work with you in 2015/16 We are really pleased to have worked with you over the past year. We have established a positive and constructive relationship. Together we have delivered some great outcomes. An efficient audit we delivered the accounts audit 7 days before the deadline. Our audit team are knowledgeable and experienced in your financial accounts and systems. Our relationship with your team provides you with a financial statements audit that continues to finish ahead of schedule releasing your finance team for other important work. Understanding your operational health through the value for money conclusion we provided you with assurance on your operational effectiveness. We highlighted a number of areas for you to consider, which related to: Relationships with commissioners - agreement of scope of contracts and funding for services to be provided Strengthening of the Trust's contracting team Implementation of Internal Audit recommendations consistency and rigour across the organisation Determining the future of the Adult Social Care contract beyond 2016/17 Review and development of estates strategy. Providing assurance on your Quality Account we agreed to undertake a review of your Quality Account and were able to provide feedback on compliance with mandatory requirements and the accuracy of performance indicators included within it. Sharing our insight we provided regular audit committee updates covering best practice. Areas we covered included The Five year Forward View, NHS Improvement quarterly reports, Better Care Fund, Manual for Accounts, NAO Code of Practice, Lessons learned from Mid Staffordshire. We also shared examples of good practice based on our national research reports on Finance and Governance and Mental Health collaboration Supporting development During the last 12 months we have hosted network events which a number of your NEDs have attended on areas such as delivering Value for Money, Alternative Delivery Models in the NHS, Data Quality and Partnership Working. Support outside of the audit we have continued to provide you with support on a range of employment tax and VAT issues through our annual helpline arrangement and via access to our expert specialist staff. Improving your annual reporting we benchmarked your annual report against best practice and provided feedback on areas where you were not providing as much information as other NHS Trusts Grant Thornton UK LLP The Annual Audit Letter for Staffordshire and Stoke on Trent Partnership NHS Trust 28 July

13 Working with the Trust Working with you in 2016/17 We will continue to work with you and support you over the next financial year. We are planning the following events: Birmingham NED Network events we have a full programme of events planned for the rest of 2016, covering areas such as the fundamentals of financial control and the development of accountable care organisations, and will be developing a further programme for Health and Social Care Integration we are working with the Manchester authorities so that we are able to share insight into how best to integrate health and social care. We will share the outcome of our work early in 2017 Learning from national research we are currently preparing reports on good practice identified from our national research work on the Future of Primary Care and on NHS Commercial Structures Audit updates - we will continue to provide regular audit committee updates covering best practice and emerging issues in the sector Providing training we will continue to provide financial accounts and annual reporting training for NHS Trust finance staff Improving your annual reporting we will benchmark your annual report and highlight potential areas for improvement Providing insight we will update our Health and Well Being analysis and share our information on key health conditions and lifestyle needs in your area. Locally our focus will be on: An efficient audit continuing to work in partnership with you to deliver an efficient audit Support and challenge around your financial position we will robustly assess and challenge your financial position Understanding your operational health we will focus our value for money conclusion work on your key risks and challenges, and ensure that any feedback we provide is of benefit to you in assisting you in focussing your activities Assurance on your Quality Account we will again undertake an external review of your Quality Account, should you require us to do so Support outside of the audit we will continue to maintain a dialogue with you throughout the year, not just at the year end, and will always be willing to explore any areas where we may be able to support you 2016 Grant Thornton UK LLP The Annual Audit Letter for Staffordshire and Stoke on Trent Partnership NHS Trust 28 July

14 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 70,940 70,940 94,586 Total fees 70,940 70,940 94,586 Fees for other services Service Fees Audit related services 6,500 Assurance on your quality account Non audit related services Annual tax helpline 2,500 Reports issued Report Date issued Audit Plan December 2015 Audit Findings Report May 2016 Annual Audit Letter July Grant Thornton UK LLP The Annual Audit Letter for Staffordshire and Stoke on Trent Partnership NHS Trust 28 July

15 Appendix B: Grant Thornton in Health Our client base and delivery We are the largest supplier of external audit services to the NHS We audit over 120 NHS organisations 99% of 2015/16 audit reports were issued by the national deadline Our clients scored us 8 out of 10 or higher Our connections We meet regularly with and second people to the Department of Health, CQC, NHS Improvement and NHS England We work closely with local government and blue light services We work with the Think Tanks and legal firms to develop workshops and good practice We develop national reports, seminars and training to support our clients and to provide solutions. In 2016 we issued reports on Mental Health Collaboration, and NHS governance and finance. We will publish reviews on the Future of Primary Care and on NHS commercial structures later this year. Our support for the sector We are sponsors for HFMA and work with the provider faculty, mental health faculty and commissioning faculty. We regularly speak at HFMA events to share best practice and solutions. We provide auditor briefings into what is happening with department policy, sector regulation, and at other NHS organisations to help support our clients. We provide Key Issues Bulletins that summarise what is happening in the sector. We hold regular 'free to access' financial reporting and other training sessions for finance staff to ensure they have the latest technical guidance. Our quality We fully meet the criteria for appointment as external auditors. Our audit approach complies with the NAO's Code of Audit Practice, and International Standards on Auditing. We are fully compliant with ethical standards We have passed all external quality inspections including QAD and AQRT. Our technical support We are members of all of the key NAO, ICAEW, and HFMA technical forums. We have specialists leads for Public Sector Audit quality and Public Sector technical. We provide national technical guidance on emerging auditing, financial reporting and ethical areas. Local teams are supported on information technology by specialist IT auditors. We use specialist audit software to identify and assess audit risk. Our people We have over 30 engagement leads accredited by ICAEW to issue NHS audit reports We have over 300 public sector specialists We invest heavily in our people including technical and personal development training We invest in the future of the public sector and employ over 80 Public Sector trainee accountants 2016 Grant Thornton UK LLP The Annual Audit Letter for Staffordshire and Stoke on Trent Partnership NHS Trust 28 July

16 2016 Grant Thornton UK LLP The Annual Audit Letter for Staffordshire and Stoke on Trent Partnership NHS Trust 28 July 2016