The Audit Findings for Northern Devon Healthcare NHS Trust Charitable Fund

Transcription

1 The Audit Findings for Northern Devon Healthcare NHS Trust Charitable Fund Year ended 31 March July 2013 Elizabeth Cave Engagement Lead T E liz.a.cave@uk.gt.com Mark Bartlett Engagement Manager T E mark.bartlett@uk.gt.com Stephen Clarke Audit Executive T E stephen.t.clarke@uk.gt.com 2013 Grant Thornton UK LLP Audit Findings Date

2 The contents of this report relate only to those matters which came to our attention during the conduct of our normal audit procedures which are designed primarily for the purpose of expressing our opinion on the financial statements. Our audit is not designed to test all internal controls or identify all areas of control weakness. However, where, as part of our testing, we identify any control weaknesses, we will report these to you. In consequence, our work cannot be relied upon to disclose defalcations or other irregularities, or to include all possible improvements in internal control that a more extensive special examination might identify. We do not accept any responsibility for any loss occasioned to any third party acting, or refraining from acting on the basis of the content of this report, as this report was not prepared for, nor intended for, any other purpose Grant Thornton UK LLP Audit Findings Date 2

3 Contents Section Page 1. Executive summary 5 2. Audit findings 8 3. Fees, non audit services and independence Communication of audit matters 20 Appendices A Action plan B Audit opinion 2013 Grant Thornton UK LLP Audit Findings Date 3

4 Section 1: Executive summary 01. Executive summary 02. Audit findings 03. Fees, non audit services and independence 04. Communication of audit matters 2013 Grant Thornton UK LLP Audit Findings Date

5 Executive summary Executive summary Purpose of this report This report was originally taken to the Charitable Funds Committee on 15 July The financial statements could not be approved at that meeting as the restricted and unrestricted income position needing to be restated. This has now been carried out in accordance with recommendation 1 of the action plan on page 23, and we anticipate issuing an unqualified opinion on the Charity's financial statements. No other amendment has been made to this report. This report highlights the key issues affecting the results of Northern Devon Healthcare NHS Trust Charitable Fund (the Charity) and the preparation of the Charity's financial statements for the year ended 31 March It is also used to report our audit findings to management and those charged with governance in accordance with the requirements of International Standard on Auditing (UK & Ireland) 260. We have agreed with the Charity that the communications required under ISA 260 would be discharged through a report to the Charitable Funds Committee, which acts as those charged with governance on behalf of Northern Devon Healthcare NHS Trust, the Charity's sole trustee. We received draft financial statements and accompanying working papers at the commencement of our work, well in advance of the national deadline. Key audit and financial reporting issues Financial statements opinion We have not identified any adjustments affecting the Charity's net movement in funds. Some amendments have been made to disclosures in the financial statements to improve the presentation of the accounts. The key messages arising from our audit of the Charity's financial statements are: The primary statements currently show 1.5m of restricted income funds. The Charity has reviewed the classification of funds between restricted and unrestricted funds. This has identified that restricted funds at 31 March 2013 are only 0.5m. The financial statements need to be restated to reflect this position. Cash balances have increased from 324k at 31 March 2012 to 754k at 31 March These increased balances are earning very little interest currently and could have been invested to achieve a better return. Introduction Our audit is substantially complete although we are finalising our procedures in the following areas: review of the revised financial statements obtaining and reviewing the management letter of representation review of revised version of the Annual Report and updating our post balance sheet events review, to the date of signing the opinion We anticipate providing an unqualified opinion on the Charity s financial statements when they have been restated for the revised split between restricted and unrestricted funds. Further details are set out in section two of this report Grant Thornton UK LLP Audit Findings Date 5

6 Executive summary Controls Roles and responsibilities The Charity's management is responsible for the identification, assessment, management and monitoring of risk, and for developing, operating and monitoring the system of internal control. Our audit is not designed to test all internal controls or identify all areas of control weakness. However, where, as part of our testing, we identify any control weaknesses, we report these to the Charity. Findings The Charity does not have a contract in place with its fund managers, Barclays Wealth. There is no evidence that the financial statements are reviewed by a senior member of finance staff. Further details are provided within section two of this report. The way forward Matters arising from the financial statements audit have been discussed with the Director of Finance and Performance. We have made a small number of recommendations, which are set out in the action plan. Recommendations have been discussed and agreed with the Director of Finance and the finance team. Acknowledgement We would like to take this opportunity to record our appreciation for the assistance provided by the finance team and other staff during our audit. Grant Thornton UK LLP July Grant Thornton UK LLP Audit Findings Date 6

7 Section 2: Audit findings 01. Executive summary 02. Audit findings 03. Fees, non audit services and independence 04. Communication of audit matters 2013 Grant Thornton UK LLP Audit Findings Date

8 Audit findings Overview of audit findings In this section we present our findings in respect of matters and risks identified at the planning stage of the audit and additional matters that arose during the course of our work. Account Transaction cycle Material misstatement risk? Description of risk Audit findings Voluntary Income Voluntary Income Other Voluntary income not correctly recorded None Activities for generating income Other Revenue None None Investment Income Investments None None Income from deposit accounts Investment None None Costs of generating funds Operating Expenses None None Cost of generating voluntary Income Operating Expenses None None Fundraising trading costs Operating Expenses None None Investment management costs Investments None None Charitable activities Operating Expenses None None 2013 Grant Thornton UK LLP Audit Findings Date 8

9 Audit findings Account Transaction cycle Material misstatement risk? Description of risk Audit findings Governance Operating Expenses None None Other resources expended Operating Expenses None None Current year realised gains on disposal of assets Operating Expenses None None Gains and losses on investment assets Operating Expenses None None Intangible assets Intangible assets None None Investments Investment Other Fair value measurements priced using inputs not based on observable market data (using models or similar techniques) not correct None Debtors Other Revenue None 8k error identified Cash Cash & Bank None 8k error identified Creditors Operating Expenses None None Unrestricted fund Equity None None Restricted Income funds Equity None Restricted funds stated as 1.5m. Recent work by the Charity has identified that restricted funds should by 0.5m Grant Thornton UK LLP Audit Findings Date 9

10 Audit findings Audit findings against significant risks "Significant risks often relate to significant non-routine transactions and judgmental matters. Non-routine transactions are transactions that are unusual, either due to size or nature, and that therefore occur infrequently. Judgmental matters may include the development of accounting estimates for which there is significant measurement uncertainty" (ISA 315). In this section we detail our response to the significant risks of material misstatement which we identified in the Audit Plan. As we noted in our plan, there are two presumed significant risks which are applicable to all audits under auditing standards. Risks identified in our audit plan Work completed Assurance gained and issues arising 1. Improper revenue recognition Under ISA 240 there is a presumed risk that revenue may be misstated due to the improper recognition of revenue We have undertaken the following: review and testing of revenue recognition policies review of unusual significant transactions Our audit work has not identified any issues in respect of revenue recognition. See voluntary testing below 2. Management override of controls Under ISA 240 there is a presumed risk that the risk of management over-ride of controls is present in all entities. We have undertaken the following: review of accounting estimates, judgements and decisions made by management testing of journals entries review of unusual significant transactions Our audit work has not identified any evidence of management override of controls. In particular the findings of our review of journal controls and testing of journal entries has not identified any significant issues. We set out later in this section of the report our work and findings on key accounting estimates and judgements Grant Thornton UK LLP Audit Findings Date 10

11 Audit findings Audit findings against other risks In this section we detail our response to the other risks of material misstatement which we identified in the Audit Plan. Recommendations, together with management responses are attached at appendix A. Transaction cycle Description of risk Work completed Assurance gained & issues arising Voluntary income Voluntary income not correctly recorded We have undertaken the following work in relation to this risk: Our audit work has not identified any significant issues in relation to the risk identified. Documentation of our understanding of processes and key controls over the transaction cycle Walkthrough of the key controls to assess the whether those controls are designed effectively Substantive testing of voluntary income Investments Fair value measurements priced using inputs not based on observable market data (using models or similar techniques) not correct We have undertaken the following work in relation to this risk: Documentation of our understanding of processes and key controls over the transaction cycle Walkthrough of the key controls to assess the whether those controls are designed effectively Our audit work has not identified any significant issues in relation to the risk identified. Substantive testing of voluntary income 2013 Grant Thornton UK LLP Audit Findings Date 11

12 Audit findings Accounting policies, Estimates & Judgements In this section we report on our consideration of accounting policies, in particular revenue recognition policies, and key estimates and judgements made and included with the Trust's financial statements. Accounting area Summary of policy Comments Assessment Revenue recognition Incoming resources are recognised when the Charity is entitled to the resource, there is reasonable certainty that it will be received and it can be measured with sufficient reliability. Income from legacies is recognised upon receipt or when receipt is reasonably certain e.g. confirmation received from representatives of the estate. Judgements and estimates Key estimates and judgements include: Valuation of investments We have reviewed the Charity's recognition of revenue and found that: Appropriate policies had been used Accounting policies had been adequately disclosed Revenue had been appropriately recognised We reviewed the accounting areas where the Charity has exercised judgement and used estimates. We found that: Appropriateness policies had been used Accounting policies had been adequately disclosed Areas where judgement had been used were supported by the work of an expert or third party where appropriate Other accounting policies The Charity has adopted the standard accounting policies for NHS charitable funds. We have reviewed the Charity's policies and do not have any comments to make. Assessment Marginal accounting policy which could potentially attract attention from regulators Accounting policy appropriate but scope for improved disclosure Accounting policy appropriate and disclosures sufficient 2013 Grant Thornton UK LLP Audit Findings Date 12

13 Audit findings Unadjusted misstatements The table below provides details of adjustments identified during the audit but which have not been made within the final set of financial statements. The Charitable Funds Committee is required to approve management's proposed treatment of all items recorded within the table below: Detail 1 The financial statements show 1.5m of restricted funds but recent work by the Charity has identified that restricted funds are 0.5m. The statements should be restated for the correct split between restricted and unrestricted. This amount is material to the accounts and impacts on the users of the statements. Statement of Financial Activities '000 Balance Sheet '000 Reason for not adjusting 1,020 1,020 The Charity did not have time to make the necessary amendments to restate the Statement of Financial Activities 2013 Grant Thornton UK LLP Audit Findings Date 13

14 Audit findings Adjusted misstatements A number of adjustments to the draft accounts have been identified during the audit process. We are required to report all misstatements to those charged with governance, whether or not the accounts have been adjusted by management. The table below summarises the adjustments arising from the audit which have been processed by management. Impact of adjusted misstatements All adjusted misstatements are set out in detail below along with the impact on the key statements and the reported surplus. Detail 1 The cash at bank balance was overstated due to a banking error. Charity monies were credited to the Trust bank account and are now shown within debtors. Statement of Financial Activities '000 Balance Sheet '000 Impact on net movement in funds Nil 2013 Grant Thornton UK LLP Audit Findings Date 14

15 Audit findings Misclassifications & disclosure changes The table below provides details of misclassification and disclosure changes identified during the audit which have been made in the final set of financial statements. Adjustment type Value '000 Account balance Impact on the financial statements 1 Disclosure N/A Note 4 Investments A note analysing investments representing over 5% of the portfolio was not disclosed. This has been included in the revised accounts Grant Thornton UK LLP Audit Findings Date 15

16 Audit findings Internal controls The purpose of an audit is to express an opinion on the financial statements. Our audit included consideration of internal control relevant to the preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control. The matters reported here are limited to those deficiencies that we have identified during the course of our audit and that we have concluded are of sufficient importance to merit being reported to you in accordance with auditing standards. These and other recommendations, together with management responses, are included in the action plan attached at appendix A. Assessment Issue and risk Recommendations The Charity does not have a contract in place with Barclays Wealth, who are not required to have an AAF01 audit report carried out. There is no evidence of a review of the Charity financial statements by a senior member of Finance staff before they are presented for audit. The Charity must ensure that it puts appropriate arrangements in place to ensure that responsibilities are clearly set out between itself and Barclays Wealth and that the investment policy of the Charity is adhered to. The Charity should ensure that a senior member of finance staff carries out an evidenced quality review of the financial statement before they are presented for audit. Assessment Significant deficiency risk of significant misstatement Deficiency risk of inconsequential misstatement 2013 Grant Thornton UK LLP Audit Findings Date 16

17 Audit findings Other communication requirements We set out below details of other matters which we, as auditors, are required by auditing standards to communicate to those charged with governance. Issue Commentary 1. Matters in relation to fraud We have previously discussed the risk of fraud with the Charity and we have not been made aware of any incidents in the period and no other issues have been identified during the course of our audit procedures. 2. Matters in relation to related parties 3. Matters in relation to laws and regulations We are not aware of any related party transactions which have not been disclosed We are not aware of any significant incidences of non-compliance with relevant laws and regulations. 4. Written representations A standard letter of representation has been requested from the Charity. 5. Disclosures Our review found no material omissions in the financial statements. 6. Going Concern Our audit work has not identified any matters which indicate that preparation of the accounts under the going concern assumption would not be appropriate Grant Thornton UK LLP Audit Findings Date 17

18 Section 3: Fees, non audit services and independence 01. Executive summary 02. Audit findings 03. Fees, non audit services and independence 04. Communication of audit matters 2013 Grant Thornton UK LLP Audit Findings Date

19 Fees, non audit services and independence Fees, non audit services and independence We confirm below our final fees charged for the audit and confirm there were no fees for the provision of non audit services. Fees Planned audit fee 4,500 Actual audit fee 4,500 Variance 4,500 Fees for other services Service Fees None Nil Independence and ethics We confirm that there are no significant facts or matters that impact on our independence as auditors that we are required or wish to draw to your attention. We have complied with the Auditing Practices Board's Ethical Standards and therefore we confirm that we are independent and are able to express an objective opinion on the financial statements. We confirm that we have implemented policies and procedures to meet the requirements of the Auditing Practices Board's Ethical Standards Grant Thornton UK LLP Audit Findings Date 19

20 Section 4: Communication of audit matters 01. Executive summary 02. Audit findings 03. Value for Money 04. Communication of audit matters 2013 Grant Thornton UK LLP Audit Findings Date

21 Communication of audit matters Communication of audit matters to those charged with governance International Standards on Auditing (ISA) 260, as well as other ISAs, prescribe matters which we are required to communicate with those charged with governance, and which we set out in the table opposite. The Audit Plan outlined our audit strategy and plan to deliver the audit, while this Audit Findings report presents the key issues and other matters arising from the audit, together with an explanation as to how these have been resolved. Respective responsibilities The Audit Findings Report has been prepared in the context of the Statement of Responsibilities of Auditors and Audited Bodies issued by the Audit Commission ( We have been appointed as the Charity independent external auditors by the Audit Commission, the body responsible for appointing external auditors to local public bodies in England. As external auditors, we have a broad remit covering finance and governance matters. Our annual work programme is set in accordance with the Code of Audit Practice ('the Code') issued by the Audit Commission and includes nationally prescribed and locally determined work. Our work considers the Charity's key risks when reaching our conclusions under the Code. It is the responsibility of the charity to ensure that proper arrangements are in place for the conduct of its business, and that public money is safeguarded and properly accounted for. We have considered how the Charity is fulfilling these responsibilities. Our communication plan Respective responsibilities of auditor and management/those charged with governance Overview of the planned scope and timing of the audit. Form, timing and expected general content of communications Views about the qualitative aspects of the entity's accounting and financial reporting practices, significant matters and issues arising during the audit and written representations that have been sought Audit Plan Audit Findings Confirmation of independence and objectivity A statement that we have complied with relevant ethical requirements regarding independence, relationships and other matters which might be thought to bear on independence. Details of non-audit work performed by Grant Thornton UK LLP and network firms, together with fees charged Details of safeguards applied to threats to independence Material weaknesses in internal control identified during the audit Identification or suspicion of fraud involving management and/or others which results in material misstatement of the financial statements Compliance with laws and regulations Expected unmodified auditor's report Uncorrected misstatements Significant matters arising in connection with related parties Significant matters in relation to going concern 2013 Grant Thornton UK LLP Audit Findings Date 21

22 Appendices Appendices 2013 Grant Thornton UK LLP Audit Findings Date 22

23 Appendices Appendix A: Action plan Priority High - Significant effect on control system Medium - Effect on control system Low - Best practice Rec No. Recommendation Priority Management response Implementation date & responsibility 1 The financial statements must be restated for the revised split between restricted and unrestricted funds High The financial statements have been restated and agreed with the external auditors. Actioned September Arrangements should be put in place to allow excess cash balances to be invested in order achieve better returns. Medium Arrangements have been set up with Barclays Wealth for the investment of cash balances. Actioned August The Charity must ensure that it puts appropriate arrangements in place to ensure that responsibilities are clearly set out between itself and Barclays Wealth and that the investment policy of the Charity is adhered to. High Agreed. Arrangements to be reviewed before the next committee meeting. January 2014 Andy Robinson 4 The Charity should ensure that a senior member of finance staff carries out an evidenced quality review of the financial statements before they are presented for audit. High Agreed March 2014 Andy Robinson 2013 Grant Thornton UK LLP Audit Findings Date 23

24 Appendices Appendix B: Audit opinion We anticipate we will provide the Trust with an unmodified audit report Independent auditor's report to the trustees of Northern Devon Healthcare NHS Trust Charitable Fund We have audited the financial statements of Northern Devon Healthcare NHS Trust Charitable Fund for the year ended 31 March 2013 which comprise the statement of financial activities, the balance sheet and related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the charity's trustees, as a body, in accordance with Section 154 of the Charities Act Our audit work has been undertaken so that we might state to the charity's trustees those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the charity and its trustees as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of trustees and auditor As explained more fully in the Trustees Responsibilities Statement set out on page 1, the trustees are responsible for the preparation of financial statements which give a true and fair view. We have been appointed as auditor under section 149 of the Charities Act 2011 and report in accordance with regulations made under section 154 of that Act. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s (APB's) Ethical Standards for Auditors. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Charities Act 2011 requires us to report to you if, in our opinion: the information given in the Trustees Annual Report is inconsistent in any material respect with the financial statements; or sufficient accounting records have not been kept; or the financial statements are not in agreement with the accounting records and returns; or we have not received all the information and explanations we require for our audit. Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Hartwell House, Victoria Street, Bristol BS1 6FT Date: Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the APB's website at Opinion on financial statements In our opinion the financial statements: give a true and fair view of the state of the charity s affairs as at 31 March 2013, and of its incoming resources and application of resources, for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Charities Act Grant Thornton UK LLP Audit Findings Date 24

25 2013 Grant Thornton UK LLP. All rights reserved. 'Grant Thornton' means Grant Thornton UK LLP, a limited liability partnership. Grant Thornton is a member firm of Grant Thornton International Ltd (Grant Thornton International). References to 'Grant Thornton' are to the brand under which the Grant Thornton member firms operate and refer to one or more member firms, as the context requires. Grant Thornton International and the member firms are not a worldwide partnership. Services are delivered independently by member firms, which are not responsible for the services or activities of one another. Grant Thornton International does not provide services to clients. grant-thornton.co.uk 2013 Grant Thornton UK LLP Audit Findings Date