Annual Audit Report 2016 Welsh Ambulance Services NHS Trust

Transcription

1 Annual Audit Report 2016 Welsh Ambulance Services NHS Trust Audit year: Date issued: January 2017 Document reference: 716A2016

2 This document has been prepared as part of work performed in accordance with statutory functions. In the event of receiving a request for information to which this document may be relevant, attention is drawn to the Code of Practice issued under section 45 of the Freedom of Information Act The section 45 code sets out the practice in the handling of requests that is expected of public authorities, including consultation with relevant third parties. In relation to this document, the Auditor General for Wales and the Wales Audit Office are relevant third parties. Any enquiries regarding disclosure or re-use of this document should be sent to the Wales Audit Office at info.officer@audit.wales. The team who delivered the work comprised Anthony Veale, Dave Thomas, Michelle Phoenix and Carol Moseley.

3 Contents Summary report 4 Detailed report About this report 6 Section 1: Audit of accounts 7 I have issued an unqualified opinion on the financial statements of the Trust, although in doing so, I have brought several issues to the attention of officers and the Audit Committee, and placed a substantive report alongside my audit opinion. 7 Section 2: Arrangements for securing efficiency, effectiveness and economy in the use of resources 9 Appendices The Trust has adequate financial management processes in place and recognises further opportunities to strengthen and mature its approach 9 The Trust has made good progress in improving its strategic planning and governance arrangements during 2016 and is aware that continued pace and momentum are needed to embed changes and address remaining issues 11 Appendix 1 Reports issued since my last annual audit report 14 Appendix 2 Audit fee 15 Page 3 of 16 - Annual Audit Report 2016 Welsh Ambulance Services NHS Trust

4 Summary report Summary 1 This report summarises my findings from the audit work I have undertaken at the Welsh Ambulance Services NHS Trust (the Trust) during The work I have done at the Trust allows me to discharge my responsibilities under the Public Audit (Wales) Act 2004 (the 2004 Act) in respect of the audit of accounts and the Trust s arrangements to secure efficiency, effectiveness and economy in its use of resources. 3 My audit work has focused on strategic priorities as well as the significant financial and operational risks facing the Trust, and which are relevant to my audit responsibilities. More detail on the specific aspects of my audit can be found in the separate reports I have issued during the year. These reports are discussed and their factual accuracy agreed with officers and presented to the Audit Committee. The reports I have issued are shown in Appendix 1. 4 This report has been agreed for factual accuracy with the Chief Executive and the Executive Director of Finance and ICT. It will be presented to the Board in January 2017 and a copy provided to every member of the Trust. We strongly encourage wider publication of this report by the Trust. Following Board consideration, the report will also be made available to the public on the Wales Audit Office website. 5 The key messages from my audit work are summarised under the following headings. Section 1: Audit of accounts 6 I have issued an unqualified opinion on the financial statements of the Trust, although in doing so I have brought several issues to the attention of officers and the Audit Committee. 7 In addition, I placed a substantive report on the Trust s financial statements alongside my audit opinion. My report explains the two new financial duties introduced on 1 April 2014 by the NHS Finance (Wales) Act 2014, the Trust s performance against them, and the implications for I have also concluded that the Trust s accounts were properly prepared and materially accurate. My work did not identify any material weaknesses in the Trust s internal controls relevant to my audit of the accounts. 9 The Trust achieved financial balance at the end of I set out more detail about the financial position and financial management arrangements in Section 2 of this report. Page 4 of 16 - Annual Audit Report 2016 Welsh Ambulance Services NHS Trust

5 Section 2: Arrangements for securing efficiency, effectiveness and economy in the use of resources 10 I have reviewed the Trust s arrangements for securing efficiency, effectiveness and economy in the use of its resources. This includes my structured assessment work which has examined the Trust s financial management arrangements, its governance and assurance arrangements, and the progress made in relation to the improvement issues identified last year. This work has led me to draw the following conclusions. The Trust has adequate financial management processes in place and recognises further opportunities to strengthen and mature its approach 11 The Trust has adequate financial planning arrangements but is dependent on the timely flow of the funding agreed with the Commissioner. 12 Financial controls are in place but the Trust is seeking to improve these further, specifically in relation to the maintenance of its fixed asset register. 13 The Trust has improved its financial reporting and has opportunities for further development of the format of financial reporting to the Board. 14 Whilst achieving financial balance in recent years, the Trust faces further challenges in to secure its financial duty to balance income and expenditure. The Trust has made good progress in improving its strategic planning and governance arrangements during 2016 and is aware that continued pace and momentum are needed to embed changes and address remaining issues 15 The Trust has advanced its strategic planning approach leading to an approved integrated medium term plan in 2016 and recognised further opportunities to strengthen planning arrangements. 16 The Trust is demonstrating a positive direction of travel in developing its governance and assurance arrangements but there is more to do. 17 The Trust has made good progress in addressing previous structured assessment recommendations and recognises further work is needed to fully develop and embed changes. 18 We gratefully acknowledge the assistance and co-operation of the Trust s staff and members during the audit. Page 5 of 16 - Annual Audit Report 2016 Welsh Ambulance Services NHS Trust

6 Detailed report About this report 19 This Annual Audit Report 2016 to the board members of the Trust sets out the key findings from the audit work that I have undertaken between December 2015 and November My work at the Trust is undertaken in response to the requirements set out in the 2004 Act 1. That act requires me to: a) examine and certify the accounts submitted to me by the Trust, and to lay them before the National Assembly; b) satisfy myself that the expenditure and income to which the accounts relate have been applied to the purposes intended and in accordance with the authorities which govern it; and c) satisfy myself that the Trust has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources. 21 In relation to (c), I have drawn assurances or otherwise from the following sources of evidence: the results of audit work on the Trust s financial statements; work undertaken as part of my latest structured assessment of the Trust, which examined the arrangements for financial management, governance and assurance; and the results of the work of other external review bodies, where they are relevant to my responsibilities. 22 I have issued a number of reports to the Trust this year. The messages contained in this annual audit report represent a summary of the issues presented in these more detailed reports, a list of which is included in Appendix The findings from my work are considered under the following headings: Section 1: audit of accounts Section 2: arrangements for securing economy, efficiency and effectiveness in the use of resources 24 Appendix 2 presents the latest estimate on the audit fee that I will need to charge to cover the actual costs of undertaking my work at the Trust, alongside the original fee that was set out in the 2016 Audit Plan. 1 Public Audit (Wales) Act 2004 Page 6 of 16 - Annual Audit Report 2016 Welsh Ambulance Services NHS Trust

7 Section 1: Audit of accounts 25 This section of the report summarises the findings from my audit of the Trust s financial statements for These statements are the means by which the organisation demonstrates its financial performance and sets out its net operating costs, recognised gains and losses, and cash flows. Preparation of an organisation s financial statements is an essential element in demonstrating appropriate stewardship of public money. 26 In examining the Trust s financial statements, I am required to give an opinion on: whether they give a true and fair view of the financial position of the Trust and of its income and expenditure for the period in question; whether they are free from material misstatement whether caused by fraud or by error; whether they are prepared in accordance with statutory and other requirements, and comply with all relevant requirements for accounting presentation and disclosure; whether that part of the remuneration report to be audited is properly prepared; and the regularity of the expenditure and income. 27 In giving this opinion, I have complied with my Code of Audit Practice and the International Standards on Auditing (ISAs). I have issued an unqualified opinion on the financial statements of the Trust, although in doing so, I have brought several issues to the attention of officers and the Audit Committee and placed a substantive report alongside my audit opinion The Trust s accounts were properly prepared and materially accurate 28 The draft financial statements for the year ended 31 March 2016 were submitted for audit on 29 April 2016, in accordance with the agreed deadline date. 29 I am required by ISA 260 to report issues arising from my work to those charged with governance before I issue my audit opinion on the accounts. My Financial Audit Engagement Lead reported these issues to the Trust s Audit Committee on 26 May Exhibit 1 summarises the key issues set out in that report. Page 7 of 16 - Annual Audit Report 2016 Welsh Ambulance Services NHS Trust

8 Exhibit 1: Issues identified in the Audit of Financial Statements Report Issue Remuneration report Maintenance of the fixed asset register Capitalisation of staff costs Related party disclosures Accounting for losses and special payments Auditors comments Amendments and additional disclosures were made to the draft remuneration report to comply with the requirements of the Welsh Government. Our work identified that a number of improvements were required to the recording of assets and the disposal of assets within the fixed asset register. The Trust is taking action to address these issues. The Trust needs to review the methodology and processes to support the capitalisation of staff costs. This work is in progress. Our work identified that the Trust s arrangement to obtain related party confirmations from Board members and senior officers needs to be strengthened. The Trust is taking action to address this issue. Our work identified that the arrangements for recording and use of the losses and special payments register for identifying provisions and losses and the recording of these within the financial statements need to be strengthened. Again, the Trust is taking action to address this issue. 30 As part of my financial audit, I also undertook a review of the summary financial statements and annual report I concluded that the summary statements were consistent with the full statements and that the annual report was compliant with Welsh Government guidance. 31 My separate independent examination of the funds held on trust financial statements is complete and the accounts were approved by the Board on 15 December I will issue my certificate early in January The independent review did not identify any matters to be reported to the Trustees. My work did not identify any material weaknesses in the Trust s internal controls relevant to my audit of the accounts 32 I reviewed the Trust s internal controls that I considered to be relevant to the audit to help me identify, assess and respond to the risks of material misstatement in the accounts. I did not, however, consider them for the purposes of expressing an opinion on their operating effectiveness of internal control. My review did not identify any significant deficiencies in the Trust s internal controls. Page 8 of 16 - Annual Audit Report 2016 Welsh Ambulance Services NHS Trust

9 Section 2: Arrangements for securing efficiency, effectiveness and economy in the use of resources 33 I have a statutory requirement to satisfy myself that NHS bodies have proper arrangements in place to secure efficiency, effectiveness and economy in the use of their resources. I have undertaken a range of performance audit work at the Trust over the last 12 months to help me discharge that responsibility. This work has involved: reviewing the Trust s financial management arrangements, including the progress being made in delivering cost saving plans and their contribution to achieving financial balance; assessing the effectiveness of the Trust s governance and assurance arrangements through my structured assessment work, including review of the progress made in addressing structured assessment recommendations made last year; and reviewing the Trust s arrangements for tracking progress against external audit recommendations. 34 The main findings from this work are summarised under the following headings. The Trust has adequate financial management processes in place and recognises further opportunities to strengthen and mature its approach 35 My structured assessment work in 2016 has considered the action that the Trust is taking to achieve financial balance and create longer-term financial sustainability. I have assessed the financial position of the organisation, the approach to financial planning, financial controls and stewardship, and the arrangements for financial monitoring and reporting. The Trust has adequate financial planning arrangements in place but is dependent on Welsh Health Boards committing to the level of funding agreed with the Commissioner 36 The Trust has produced an integrated medium term plan (IMTP) for the period The IMTP received approval from the Welsh Government in June The financial plan for , which is incorporated within the IMTP, has been primarily based on the level of service activity incurred by the Trust during and the associated level of funding required to provide this service. Going forward, the demand and capacity review completed in 2016 and full implementation of the clinical response model will support more detailed and improved financial planning. Page 9 of 16 - Annual Audit Report 2016 Welsh Ambulance Services NHS Trust

10 37 The baseline funding included within the plan, although agreed with the Commissioner, has not yet been formally confirmed by the Welsh Health Boards and the Trust has not received the cash flows it had expected. The Trust is working with the Commissioner and Health Boards to resolve this. 38 Cost improvement plans are in place to support delivery of the 6.2 million savings target for By October 2016, 3.88 million of savings had been achieved, although this includes some non-recurring savings such as the 1 million sale of fixed assets. The Trust has financial controls in place but is seeking to improve these further specifically in respect of the maintenance of its fixed asset registers 39 The Trust has financial controls in place underpinned with standing financial instructions, standing orders and a scheme of delegation. Internal audit concluded that the Trust can take reasonable assurance that arrangements to secure governance, risk management and internal control are suitably designed and applied effectively. Specific Internal Audit work covering budgetary control and corporate governance confirmed substantial assurance in these areas. 40 Our Audit of the Financial Statements identified a number of areas of requiring improvement. Primarily, these related to controls supporting the stewardship of assets. We reported these issues within our Audit of the Financial Statements report to the Audit Committee in June 2016 and have subsequently delivered a more detailed report and audit recommendations to management. The Trust has improved its financial reporting and has opportunities for further development 41 The Trust produces monthly monitoring returns to the Welsh Government and internal financial reports which are considered bi-monthly by the Finance and Resources Committee and quarterly by the Board. Reporting is timely and consistent. The over-spends and related funding issues incurred during were disclosed to the Board from an early stage, along with details of the ongoing communications with the Welsh Government and the various outcomes under consideration. 42 During , financial reporting to the Finance and Resources Committee has highlighted the key areas of concern for management, including the current nonagreement by the Welsh Health Boards of the base line funding and the risks associated with the delivery of the 6.2 million savings target. Our review of the format of financial reports to the Board identified both strengths and development opportunities. Page 10 of 16 - Annual Audit Report 2016 Welsh Ambulance Services NHS Trust

11 The Trust has achieved financial balance in recent years but faces further challenges in to secure its financial duty to balance income and expenditure. 43 In , the Trust reported a small surplus of 49,000. However, the Trust was reliant on the external funding flows and received additional non-recurrent funding from the Welsh Government of 3.5 million. Based on the month 12 monitoring return to the Welsh Government, the Trust did not fully achieve its million savings target in , achieving million of which million were non-recurring savings. 44 The Trust has assessed the risks associated with the achievement of the 6.2 million savings target for The savings delivery report to the Finance and Resources Committee in September 2016 identified 882,000 (14%) as high-risk areas which were to be subject to heightened scrutiny. By October 2016, savings of million had been achieved against a year to date target of million. 45 The Trust is facing continued challenges arising from increased demand for its services. Management reported a small overspend at October 2016 of 122,000 due to provision of additional capacity to meet demands early in the financial year. 46 The Trust is still forecasting a balanced financial position as at 31 March 2017 but it is essential that the baseline funding position is agreed by the Welsh Health Boards and focus is maintained to ensure delivery of remaining savings schemes. The Trust has made good progress in improving its strategic planning and governance arrangements during 2016 and is aware that continued pace and momentum are needed to embed changes and address remaining issues 47 My governance and assurance work has assessed the Trust s strategic planning and reporting arrangements and the approach for developing and reviewing a board assurance framework. I have also considered the overall effectiveness of the board and its governance structures and the progress made in addressing previous structured assessment recommendations and improvement issues. The Trust has advanced its strategic planning approach leading to an approved integrated medium term plan (IMTP) in 2016 and recognised further opportunities to strengthen planning arrangements 48 The Trust developed its first approvable IMTP in 2016, which was not subject to any approval conditions from the Welsh Government. The IMTP is underpinned by local delivery plans for each operational unit, effectively covering each of the seven health board areas. The Trust has strengthened the planning approach for the 2017 iteration of the IMTP so that the development process is better formalised, more consistent across local delivery plans and increasingly supportive of delivery of the Trust s strategic aims. Page 11 of 16 - Annual Audit Report 2016 Welsh Ambulance Services NHS Trust

12 49 Progress on the delivery of the current IMTP is reported quarterly to the Board with progress against the four specific strategic change programmes that underpin the IMTP monitored monthly by the executive IMTP delivery and assurance group (idag). Delivery of the IMTP is supported by a project planning approach, and while there is limited planning and programme management capacity, the Trust appears to be maintaining sufficient pace in delivering the IMTP and its related projects. The Trust is demonstrating a positive direction of travel in developing its governance and assurance arrangements but there is more to do 50 In reaching this conclusion I found: Board Assurance Framework: The Trust has given thought to its assurance arrangements and put essential building blocks in place, but has yet to document its Board Assurance Framework and fully implement the new Risk Management Framework. Board and Committee effectiveness: The Trust has taken steps to strengthen governance arrangements, but some weaknesses that have the potential to limit the overall effectiveness of the arrangements remain. 51 The Trust has put in place the building blocks necessary to underpin the design of its Board Assurance Framework. Clear and patient-focussed corporate priorities have been developed, and board members have been actively engaged in considering the form and function of the framework. These have been critical design steps but the Trust now needs to document its agreed Board Assurance Framework. 52 A new Risk Management Framework has recently been agreed, with detailed plans in place to fully implement and embed the framework through training and new ICT processes. The strengthened approach to risk management reflects the Trust s aim of becoming a risk enabled organisation by 2018/ Board meetings are effective and geographic rotation of meetings has been introduced to promote wider stakeholder engagement. Members provide scrutiny and challenge at Board and committee meetings although there are opportunities to strengthen various elements. These include clarifying the role and alignment of quality and safety related management sub-groups, using Board and committee self-assessment more consistently and strengthening the counter-fraud service. There are also opportunities to further strengthen some aspects of Board and Committee arrangements, such as ensuring the timeliness of papers and determining criteria for open and closed agenda items. Page 12 of 16 - Annual Audit Report 2016 Welsh Ambulance Services NHS Trust

13 The Trust has made good progress in addressing 2015 structured assessment recommendations and recognises further work is needed to fully develop and embed changes 54 Good progress has been made, but where recommendations are not yet fully complete, the Trust has plans in place to make the further progress needed to fully meet and realise the intended benefits of the recommendations. Significant progress has been made particularly in the development of new performance and risk management frameworks, although more work is needed to fully embed the risk management arrangements. Further work is also needed to develop an effective estates strategy and address continuing workforce management issues such as sickness rates. 55 In addition to reviewing the actions taken to address my 2015 structured assessment recommendations, I also considered the effectiveness of the Trust s wider arrangements to respond to my audit recommendations. I found that an audit recommendations tracker has been in place since August It is updated quarterly and identifies the senior responsible officer, intended actions, timescales, and details of actions completed or any issues arising since the previous period. The tracker is received by the Audit Committee at each of its meetings to scrutinise and challenge of the pace of progress. 56 During 2016, management has reviewed the completeness of actions and status of recommendations included in the tracker predating April This work was informed by internal audit review of all outstanding recommendations on the log at March The updated tracker now provides a clear picture on the status of pre April 2016 internal audit recommendations. 57 My 2015 structured assessment recommendations were included in the September 2016 tracker, with the reported status of actions generally consistent with my assessment of progress at that time. However, the tracker has not consistently included all of my audit recommendations to date. The Trust is addressing this so that there is appropriate Audit Committee scrutiny of progress against all internal and external audit recommendations. There is also opportunity for the Audit Committee to consider the benefit of summary reporting and seeking broader executive attendance to discuss management responses and, where necessary, the pace of progress as part of its holding to account arrangements. Page 13 of 16 - Annual Audit Report 2016 Welsh Ambulance Services NHS Trust

14 Appendix 1 Reports issued since my last annual audit report Exhibit 2: Reports issued since my last annual audit report Report Financial audit reports Date Audit of Financial Statements Report June 2016 Opinion on the Financial Statements June 2016 Final Accounts Memorandum December 2016 Performance audit reports Structured Assessment 2016 Other reports January (Draft) Audit Plan February 2016 Exhibit 3: Performance audit work still underway Report Emergency Ambulance Services Commissioning review Follow-up review of the recommendations arising from the review of Staff Concerns in 2015 Estimated completion date February 2017 March 2017 Page 14 of 16 - Annual Audit Report 2016 Welsh Ambulance Services NHS Trust

15 Appendix 2 Audit fee The 2016 Audit Plan set out the proposed audit fee of 139,750 (excluding VAT). My latest estimate of the actual fee is 150,875. The increase of 11,125 is due to additional work undertaken during the audit of the financial statements. We also conducted an independent examination of the Funds Held on Trust financial statements which incurred a fee of 1,500. Page 15 of 16 - Annual Audit Report 2016 Welsh Ambulance Services NHS Trust

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