Present: Brian McMurray (Chair) In Paddy Anderson (Director of Finance) Geraldine Fahy Attendance: Catherine McKeown (Head of Internal Audit)

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1 NORTHERN IRELAND HEALTH AND SOCIAL CARE BUSINESS SERVICES ORGANISATION GOVERNANCE AND AUDIT COMMITTEE Minutes of the Governance and Audit Committee (GAC) which took place on Tuesday, 8 October 2013 at 11:00am in the Boardroom, BSO, 2 Franklin Street, Belfast. Present: Brian McMurray (Chair) In Paddy Anderson (Director of Finance) Geraldine Fahy Attendance: Catherine McKeown (Head of Internal Audit) Robin McClelland Gillian Gest (Internal Audit Manager) Hilary McCartan Catherine O Hagan (NIAO) Marc Magill (KPMG) Steven Boyd (PWC) Emma Murray (PWC) Sandra Lowe (CFPS) Head of CFPS - Policy Karen Bailey (Director of Customer Care and Performance Janine Watterson (Committee Secretary) Fraud Awareness Month October 2013 In response to Fraud Awareness Month, the Head of Policy in the Counter Fraud and Probity Service attended the commencement of the meeting to highlight the 2013 HSC Fraud Awareness Campaign which had been launched on 2 October 2013 by Mr Edwin Poots, Minister of Health. The purpose of the Campaign was to deliver a range of initiatives aimed at increasing the level of fraud awareness amongst staff as well as promoting established fraud reporting avenues. The Head of Policy in the Counter Fraud and Probity Services also took the opportunity to highlight the ongoing fraud initiatives within Counter Fraud and Probity Services. 1. Apologies There were no apologies for absence. 2. Conflicts of Interest Declaration There were no conflicts of interest declared. 3. Minutes of Governance and Audit Committee Meeting held on 28 May and 24 September 2013 GAC 58/2013 The minutes of the meetings held on 28 May and 24 September 2013 were approved and signed. 4. Action Points arising out of Minutes of 28 May and 24 September 2013 GAC 59/2012 The Committee received the following reports in respect of the Action Points listed. (a) Action Points arising from GAC meeting held on 28 May 2013 Action Point 1, Finalise protocol between internal and external audit in respect of NAO Self- Assessment Action Plan. Head of Internal Audit (HIA) reported that this action had now been completed.

2 Action Point 2, Continue to update Committee in respect of superannuation backlog. The Director of Finance reported that good progress had been made on clearing the superannuation backlog. Further, he advised that since 1 October 2013, responsibility for this area of work had transferred from FPS to Pension Services and that Pensions anticipated that all a significant element of the backlog would be cleared by 31 March This action point would continue to be monitored through the Director of Finance s update paper on audit recommendations to the Committee. The Committee noted that all other action points had been completed. (b) Action Points arising from GAC meeting held on 28 May 2013 Action Point 1, Progress Report on HRPTS IT audit recommendations to BSO Board. The Committee noted that the Chief Executive would be presenting a progress report on the HRPTS audit points within the 2012/13 Report to those Charged with Governance to the October 2013 Board meeting. Action point 2, Present final 2012/13 Report to those Charge with Governance. Ms O Hagan reported that a Final report would be presented following certification. The Committee noted that all other action points had been completed. 5. Chair s Business (a) Update on ALB Audit Chairs Event 7 October 2013 The Chair provided members with an update on ALB Audit Chairs Event which took place on 7 October He advised that presentations had been received on: Developing Governance, Governance Statements and a Report of the Mid Staffordshire NHS Foundation Trust Public Inquiry the Francis Report all of which had provided a valuable information sharing forum for attendees. The Chair advised that DHSSPS had referred to the severe financial pressures within the HSC and the need to ensure that there is a balanced focussed on service to clients as well as financial constraints. The Secretary agreed to circulate any papers from the Event. (b) GAC Annual Report to the Board GAC 60/2013 The Chair presented the GAC Annual Report to the Board for the 2013/14 year. In approving the report the Committee requested that an additional line be included to further highlight the difficulties encountered during implementation of Business System Transformation Programme Systems. The Secretary undertook to edit the Report as requested. It was agreed that the Chair would present the Committee s Annual Report to the October 2013 Board meeting. 6. External Audit NIAO to Report (a) Report to those Charged with Governance tabled document Ms O Hagan tabled a final draft 2012/13 Report to those Charged with Governance for noting. Further, she reported that BSO accounts were currently with KPMG for final review after which they would be forwarded to the NIAO for certification. 1

3 The Committee noted the position. 7. Internal Audit (a) Progress report including Mid-Year Follow Up Exercise and Single Tender Action Review - GAC 61/2013 HIA gave a progress report on internal audit work undertaken since the last meeting. She informed the Committee that she was presenting eight reports for consideration: Bank and Cash, Mid-Year Follow up report on Limited Audits, FPS Ophthalmic Services, Review of Altair Systems - Pensions Services, Quarterly Review of Single Tender Actions and Contract Renewal Monitoring, FPS Pharmacy Pricing Review, HRPTS Pre Go Live Readiness (Western Trust), and the Mid-Year Follow Up report. Members noted each of the Reports presented and raised the following issues: i. Bank and Cash HIA reported a satisfactory level of assurance with no priority one findings. Mrs Fahy, referring to recommendation 2.4 Receipting stated that she was disappointed that cash and valuations were not being routinely recorded. The Director of Finance referring to 2.1 Training and Procedures confirmed that adequate FPL training had been delivered, based on needs, to enable finance staff to carry out their day to day tasks. He advised that due to the imminent move of the payments and income functions to shared services no additional training would take place within finance. He also highlighted the fundamental changes within the Finance Directorate following implementation of the new FPL system and the commitment of finance staff to ensure continuity of service and the production of unqualified BSO and client annual accounts during a difficult 12 month period. The Chair then enquired as to what plans were in place for ongoing technical expertise following handover of the systems by the suppliers. The Director of Finance advised that BSO were currently considering this issue. The Committee was pleased to note the satisfactory level of assurance provided with this report given the difficulties faced with implementation of new systems during the year. They cautioned however that all outstanding training should be delivered and procedures in place by year end. The Committee noted the report presented. ii. Mid-Year Follow Up Audit on Limited Audit Reports HIA advised that she had undertaken a detailed testing exercise on those reports that received limited assurance levels in 2012/13. This exercise included General Ledger, Payroll and Non Pay Expenditure audits. She reported that 53% of the 64 recommendations were fully implemented, a further 42% were partially implemented and 5% were not implemented. HIA advised that the results of the exercise showed clear signs of progress but advised that management should ensure that all outstanding issues are addressed as soon as possible. In response to a request from Mrs Fahy, HIA agreed to retain the original implementation date in future reports for review by the committee. 2

4 The Committee noted the report presented. iii. FPS Ophthalmic HIA reported a satisfactory level of assurance with no priority one findings. In response to a question from Ms Fahy, the Director of Finance confirmed that BSO would be liaising with HSCB to ensure that the necessary documentation was being held in respect of maintenance of the ophthalmic list. The Committee noted the report presented. iv. Pharmacy Price Adjustment Review HIA presented a report on the Pharmacy Price Adjustment Review 2013/14. She reported that in response to a request from FPS, Internal Audit performed a review of the pricing methodology to calculate the retrospective payment due to pharmacies for drugs identified as being in short supply for the period April 2011 October The report set out recommendations under the following headings: Retrospective Payment Methodology, Future Payment Methodology, Adjustment Payment Calculation Testing and General Observation. There was no assurance provided with this report. In response to a question from Mrs McCartan, HIA advised that in order to fulfil the statutory obligation in respect of the Drug Tariff, the Minister for Health had agreed that a concessionary payment is made to ensure that contractors are reimbursed for the full cost of medicines. The Director of Finance informed the Committee that any overpayment identified following the review will be recovered in October He also advised that a 100% review had been carried out on wholesale prices used within the calculation and any relevant adjustments to contractor payments will be made in December Further, he advised detailed discussions with HSCB to form clarity around the final methodology to be used in the payment calculation were ongoing. The Committee, in noting the report, highlighted the need for the payment calculation to be documented once agreed with all relevant organisations. v. Review of Altair System Controls Pensions Services HIA reported a satisfactory level of assurance with one priority one findings. HIA highlighted that this report had a limited scope which considered and tested the key controls in the new Altair systems. Mrs Fahy referring to recommendation 2.1 Contractor Access to Altair commented that confirmation should be sought as to the level of permissions set for external contractors and further that contractors accessing the system should be identified and formally recorded. She also suggested that this recommendation should be a priority one and not a priority two. In addition, she requested that future internal audit reports confirm that where no access abuse is discovered, this is documented within reports. Ms Fahy also commented that the findings in this report were not dissimilar to those in a previous ITS report and expressed concern that lessons learned were not being communicated throughout the organisation. HIA responded advising that she was content with the assurance levels set within the report, she explained that this was a high level audit and highlighted that the Head of Pension Services had taken immediate action in response to findings. The Committee noted the report presented. 3

5 vi. BSTP Central Team HRPTS Go Live Readiness Roll Out to Western HSC Trust HIA presented the BSTP Central Team HRPTS Go Live Readiness Roll Out to Western HSC Trust. She advised that the purpose of the review was to consider the readiness processes of the BSO Central HRPTS Team to support WHSCT s ability to go live on 2 September There was no assurance provided with this report. The Committee was pleased to note this positive report and raised no issues. vii. Healthy Start HIA reported a substantial level of assurance with no priority one findings. The Committee welcomed this positive report and raised no issues. viii. Quarterly Review of Single Tender Actions (STA) HIA presented her first Quarterly Review of STAs to the Committee. She explained that the BSO Board had requested that Internal Audit provide an independent assurance on the approval of STAs approved by the Assistant Director of PaLs. She also advised that, in addition, to the STA review Internal Audit had been requested, on a sample basis, to review the Red Amber Green status given to contracts and reported to SMT. The reviews presented related to STAs approved between 1 January and 30 June The Committee noted that from the STAs examined approval was deemed reasonable by internal audit and from the contracts reviewed the Red Amber Green status was also deeded reasonable. In conclusion the Chair stressed that, in view of issues raised by audit in 2011/12 regarding management of contracts, it was of utmost importance to document any reason for delay in awarding contracts. The Committee noted the report presented. ix. Mid-Year Follow-Up HIA presented the Mid-Year follow up report. She informed the Committee that the follow up exercise had included a review of implementation of Priority One and Two recommendations, where the implementation date had now past. The report included a follow up on outstanding 2011/12 recommendations that had not previously been implemented. The mid-year follow up report stated that 77% of Internal Audit recommendations had been fully implemented, 20% were partially implemented and 3% were not implemented. The Committee noted the position. (b) Revised Internal Audit Strategy incorporating Proposed Internal Audit Plan 2013/14 HIA presented the revised 2013/14 Internal Audit Strategy and Proposed Internal Audit Plan and highlighted the key changes since presentation of the Plan at the last meeting. The Committee noted that the Internal Audit Plan would be kept under constant review in the second half of 2013/14 year, in line with BSTP and Shared Services Progress. 4

6 The Committee approved the revised Internal Audit Strategy incorporating Proposed Internal Audit Plan 2013/ Business Matters (a) Draft BSO Mid-Year Assurance Statement together with Head of Internal Audit s Mid-Year Assurance to BSO GAC 63/2013 The Director of Finance presented a draft BSO Mid-Year Assurance Statement to 30 September 2013 together with the Head of Internal Audit s Mid-Year Assurance to the BSO which supported the Statement. In presenting the Statement, the Director of Finance highlighted paragraph 5 which inadvertently stated I confirm implementation instead of I confirm acceptance. He advised that this would be amended prior to presentation of the Statement to the BSO Board. The Committee noted the required amendment and approved the Mid-Year Assurance Statement. The Director of Finance agreed for the necessary amendment to be made and arrange for the Mid- Year Assurance Statement to be presented to the Board in October 2013 for ratification. (b) Progress Report on 2013/14 Service Risk Action Plans - GAC 64/2013 The Committee noted the progress report on Risk Action Plans as at 30 September (c) Progress Report on 2013/14 Controls Assurance Standards - GAC 65/2013 The Director of Finance presented the Progress Report on Controls Assurance Standards as at 30 September A discussion ensued on the effectiveness and merit of controls assurance standards. The Committee noted the report given. (d) Review of Risk Management Strategies and associated Procedural documents - GAC 66/2013 The Director of Customer Care and Performance presented a revised Risk Management Strategy and associated Procedural documents. She advised these documents had been approved by SMT in August 2013 and were being presented to the Committee for noting. The Director of Customer Care and Performance also drew attention to SMT s decision to maintain the Organisation s current risk appetite definition. The Committee noted the revisions to the document and proposed the following further amendments to the Risk Management Strategy: Paragraph 2.3, 3 rd paragraph should be amended to read: The BSO risk management process will give particular cognisance to Audit recommendations made for emerging risks and the various Controls Assurance Standards. Paragraph 6.1 should be amended to read: Responsibility for monitoring specific risk management areas has been delegated as follows: Paragraph 9.2 the word impacting should replace the words Health and Safety. 5

7 In response to a question from Mrs Fahy, the Director of Customer Care and Performance advised that extensive discussion had taken place at SMT on risk appetite. She also explained the risk management process in place at both Directorate and SMT level. Mr McClelland enquired what mechanisms were in place within BSO for dealing with Shared risks. The Director of Customer Care and Performance advised that when a risk is shared with another organisation it is presented to BSO Board for discussion and, if relevant, escalated to the DHSSPS and monitored at Accountability Review meetings. The Committee approved the Risk Management Strategies and associated Procedural Documents subject to the minor amendments as documented above. The Director of Customer Care and Performance agreed to have the necessary amendments completed prior to publication of the documents. 9. Director of Finance Updates (a) Monitoring of Audit Recommendations and Progress reports as at 30 September 2013 GAC 67/2013 The Director of Finance presented a progress report on BSO s internal and external audit recommendations received during the 2011/12 and 2012/13 years. The Committee in noting the report acknowledged the development and implementation of the Audit Reporting Tracker database and welcomed that it had been shortlisted for an award in BSO Recognition and Award. The Committee expressed an interest in viewing the database and the Secretary agreed for a presentation to be made to the Committee at a future meeting. (b) NFI Update The Secretary presented a progress report on the National Fraud Initiative in Northern Ireland: Data Matching 2012/13. The Committee noted that of the 532 recommended matches, 268 had been investigated. The Committee also noted that to date investigations had detected that fifteen overpayments totalling 58,265 had been made. The pension had been suspended in all cases and work was underway to recover these amounts although there was no guarantee of a full recovery. The Committee noted the report provided. (b) Fraud Report to 30 September 2013 GAC 69/2013 The Secretary presented the 2012/13 and 2011/12 Fraud/Theft Register and provided updates in respect of ongoing cases. The Committee noted the position. (c) Register of Departmental Finance Circulars - GAC 70/2013 The Committee noted the Register of Circulars which provided members with an overview of Financial Circulars received from the Department during the 2012/13 year. A copy of circular HSC 32/2013: Internal Audit Opinions was included in the Committee s papers for noting. 6

8 10. Date of Next Meeting The date of the next meeting was confirmed as Tuesday, 14 January Chair Date 7