NHS Ipswich & East Suffolk Clinical Commissioning Group

Transcription

1 NHS Ipswich & East Suffolk Clinical Commissioning Group Annual Audit Letter for the year ended 31 March June 2015 Ernst & Young LLP

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3 Ernst & Young LLP One Cambridge Business Park Cambridge CB4 0WZ Tel: Fax: ey.com Governing Body NHS Ipswich & East Suffolk Clinical Commissioning Group Rushbrook House Paper Mill Lane Bramford Ipswich IP8 4DE 8 June 2015 Dear Member NHS Ipswich & East Suffolk CCG - Annual Audit Letter 2014/15 The purpose of this annual audit letter is to communicate to the Members and external stakeholders, including members of the public, the key issues arising from our work, which we consider should be brought to the attention of the Clinical Commissioning Group (CCG). We have already reported the detailed findings from our audit work in our 2014/15 annual Audit Results Report to the 18 May 2015 Audit Committee, representing those charged with governance. We do not repeat those detailed findings in this letter. The matters reported here are the most significant for the CCG. We would like to take this opportunity to thank the CCG staff for their assistance during the course of our work. Yours faithfully Mark Hodgson Director For and on behalf of Ernst & Young LLP Enc. The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC and is a member firm of Ernst & Young Global Limited. A list of members XNAMEXs is available for inspection at 1 More London Place, London SE1 2AF, the firm s principal place of business and registered office.

4 Contents Contents 1. Executive summary Key findings Control themes and observations Fees... 7 In April 2014 the Audit Commission issued a revised version of the Statement of responsibilities of auditors and audited bodies (Statement of responsibilities). It is available from the accountable officer of each audited body and via the Audit Commission s website. The Statement of responsibilities serves as the formal terms of engagement between the Audit Commission s appointed auditors and audited bodies. It summarises where the different responsibilities of auditors and audited bodies begin and end, and what is to be expected of the audited body in certain areas. The Standing Guidance serves as our terms of appointment as auditors appointed by the Audit Commission. The Standing Guidance sets out additional requirements that auditors must comply with, over and above those set out in the Code of Audit Practice 2010 (the Code) and statute, and covers matters of practice and procedure which are of a recurring nature. This Annual Audit Letter is prepared in the context of the Statement of responsibilities. It is addressed to the Members of the audited body, and is prepared for their sole use. We, as appointed auditor, take no responsibility to any third party. Our Complaints Procedure If at any time you would like to discuss with us how our service to you could be improved, or if you are dissatisfied with the service you are receiving, you may take the issue up with your usual partner or director contact. If you prefer an alternative route, please contact Steve Varley, our Managing Partner, 1 More London Place, London SE1 2AF. We undertake to look into any complaint carefully and promptly and to do all we can to explain the position to you. Should you remain dissatisfied with any aspect of our service, you may of course take matters up with our professional institute. We can provide further information on how you may contact our professional institute. EY i

5 Executive summary 1. Executive summary Our 2014/15 audit work has been undertaken in accordance with the Audit Plan that we issued on 10 February 2015 and is conducted in accordance with the Audit Commission s Code of Audit Practice, International Standards on Auditing (UK and Ireland) and other guidance issued by the Audit Commission. The Clinical Commissioning Group (CCG) is responsible for preparing and publishing its statement of accounts, annual report and annual governance statement. It is also responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources. As auditors we are responsible for: expressing an opinion: on the 2014/15 financial statements; on the regularity of expenditure and income; on the parts of the remuneration report to be audited; and on the consistency of the information given in the annual report with the financial statements. reporting by exception: if the annual governance statement does not comply with NHSE Guidance or is not consistent with our understanding of the CCG; to the Secretary of State for Health and NHS England if we have concerns about the legality of transactions of decisions taken by the CCG; any significant matters that are in the public interest. forming a conclusion on the arrangements the CCG has in place to secure economy, efficiency and effectiveness in its use of resources. reporting to the National Audit Office (NAO) any differences over 250,000 between the accounts template used for the production of the whole of government accounts (WGA) and the audited financial statements. EY 1

6 Executive summary Summarised below are the results of our work across all these areas: Area of work Result Opinion on the: Financial statements Unqualified the accounts reported fairly on the CCG s finances. Regularity of income and expenditure Unqualified financial transactions were conducted within the CCG legal framework. Parts of remuneration report to be audited No matters to report the remuneration report was prepared properly within the rules set. Consistency of the Annual Report with the financial statements Financial information in the Annual Report was consistent with the Annual Accounts. Reports by exception: Consistency of Governance Statement Referrals to the Secretary of State and NHS England The Governance Statement was consistent with our understanding of the CCG. No matters to report or refer. Public interest report and No matters to report in the public interest. Value for money conclusion Reporting to the National Audit Office (NAO) in line with group instructions As a result of the above we have also: Issue a report to those charged with governance of the CCG communicating significant findings resulting from our audit. Issue a certificate that we have completed the audit in accordance with the requirements of the Audit Commission Act 1998 and the Code of Practice issued by the Audit Commission. In considering the CCG s arrangements for challenging how it secures economy, efficiency and effectiveness, we identified that the CCG has breached the 28 day assessment period for a received claim as stipulated within the NHS Continuing Health Care Framework as a result of a backlog of Continuing Health Care cases. 81% of claims do not meet this 28 day assessment target. The current average claim assessment period for over 66% of cases is in excess of 90 days. We modified our VFM conclusion wording as a result. No matters to report. Audit Results Report (final) issued on 18 May Issued on 22 May EY 2

7 Key findings 2. Key findings 2.1 Financial statement audit The Annual Report and Accounts is an important tool for the CCG to show how it has used public money and how it can demonstrate its financial management and financial health. We audited the CCG s Statement of Accounts in line with the Audit Commission s Code of Audit Practice, International Standards on Auditing (UK and Ireland) and other guidance issued by the Audit Commission and issued an unqualified audit report on 22 May Our detailed findings were reported to the 18 May 2015 Audit Committee. The main issues identified as part of our audit were: Significant risk : Fraud & Management Override As identified in ISA (UK and Ireland) 240, management is in a unique position to perpetrate fraud because of their ability to directly or indirectly manipulate accounting records and prepare fraudulent financial statements by overriding controls that otherwise appear to be operating effectively. There were no matters to report from our audit. Other Audit risk 1: Continuing Health Care provision This area was problematic in 2013/14, with guidance on accounting for retrospective cases emerging through the year. CCGs (and predecessor PCTs) had not adopted a consistent approach to calculating provisions which resulted in some difficulties. Although accounting arrangements seem to be clearer in 2014/15 there is a risk of further issues emerging as part of the closure process e.g. NHS England returning legacy balances to CCGs. Our audit identified that the financial statements include a provision of million that relate to cases received prior to 1 April 2013 that still have not yet been assessed at the 31 March The provision is an estimate of the additional years cost of the claim (2013/14 and 2014/15) because the claims remain un-assessed. However, under the Accounts Directions these liabilities remain the responsibility of NHS England and it is NHS England s responsibility under IAS 37 to assess its own provision for its financial statements. The CCG has therefore overstated its provision. Other Audit Risk 2: Delivery of the financial statements by the required deadline The deadline for the audit opinion has been brought forward to noon on Friday 29 May This opinion covers the completed Annual report and Remuneration report. The planned date for the Audit Committee to approve the financial statements is 18 May There is a risk that these deadline pressures may have an impact on the timeliness and quality of the financial statements and supporting working papers. The draft financial statements provided for audit and the supporting working papers were improved in quality and timeliness compared to last year. However, the draft Annual Report provided for audit had a number of omissions when compared to the requirements set out within the Manual for Accounts. We issued our audit opinions ahead of the 29 May deadline. EY 3

8 Key findings 2.2 Value for money conclusion We carry out sufficient and relevant work to conclude whether the CCG has put in place proper arrangements to secure economy, efficiency and effectiveness in the use of resources. This is known as our value for money conclusion. In accordance with guidance issued by the Audit Commission, our 2014/15 value for money conclusion was based on two criteria. We consider whether the CCG had proper arrangements in place for: Securing financial resilience Challenging how it secures economy, efficiency and effectiveness Criteria 1: Securing financial resilience We have during the course of our audit, since issuing our Audit Plan, identified a new significant risks in relation to this criteria: The CCG s achievement of its forecast outturn position in 2015/16 is dependent on the delivery of the Quality, Innovation, Productivity and Prevention (QIPP) plan. The CCG is forecasting a 4.46 million surplus for 2015/16. However, this is predicated on delivering the million QIPP target. Historically, over the last two financial years the CCG only delivered an average of 44.5% of the QIPP plan target. We have gained sufficient assurance for our conclusion about the financial resilience of the CCG, as a number of QIPP savings have been built into contracts with provider Trusts ( 1.3 million). In addition the reported surplus above is after the inclusion of a 2.23 million contingency reserve. However, the CCG s ability to deliver a significant QIPP programme, based on the track record of delivery remains a significant challenge. The CCG needs to monitor the delivery of the QIPP programme throughout the financial year and take action as necessary to ensure the quantum of savings required is achieved. Criteria 2: Securing economy, efficiency and effectiveness We identified one significant risks in relation to this criteria: Continuing Health Care backlog - Last year we reported in that the CCG had a significant backlog of unassessed continuing healthcare claims and was in breach of the NHS Continuing Health Care (CHC) Framework target. We found that the CCG remains in breach of the NHS Continuing Health Care (CHC) Framework target for the assessment of CHC claims. The CCG has a significant backlog of unassessed claims. The current performance is that 81% of claims do not meet this 28 day assessment target. The current average claim assessment period for over 66% of cases is in excess of 90 days. We modified our VFM Conclusion to report this issue. The except for modification wording was issued on 22 May 2015 Recommendation: The CCG needs to review the arrangements it has in place to assess Continuing Health Care claims in order to clear the significant backlog of cases and achieve the 28 day framework target. I require the Governing Body to consider this recommendation within the next three months and respond formally to me. EY 4

9 Key findings 2.3 Department of Health group instructions We had no matters to report to the National Audit office (NAO). We did not identify any areas of concern. 2.4 Annual governance statement We are required to consider the completeness of disclosures in the CCG s annual governance statement, identify any inconsistencies with the other information of which we are aware from our work, and consider whether it complies with Department of Health guidance. We completed this work and identified a small number of areas where further disclosure was required to reflect the position at the CCG. The CCG amended the annual governance statement to include these areas. EY 5

10 Control themes and observations 3. Control themes and observations As part of our work, we obtained an understanding of internal control sufficient to plan our audit and determine the nature, timing and extent of testing performed. Although our audit was not designed to express an opinion on the effectiveness of internal control, we are required to communicate to you significant deficiencies in internal control identified during our audit. The matters reported are shown below and are limited to those deficiencies that we identified during the audit and that we concluded are of sufficient importance to merit being reported. Description A number of ex-gratia payments have been made during the financial year. We would expect any Losses or Special payments to be reviewed by the Audit Committee, in accordance with the CCG s constitution. This has not occurred. Impact The CCG s formal governance arrangements have not been adhered to. EY 6

11 Fees 4. Fees Our fee for 2014/15 is in line with the scale fee set by the Audit Commission and reported in our 18 May 2015 Annual Results Report. Final fee 2014/15 Planned fee 2014/15 Scale fee 2014/15 Final fee 2013/14 Total Audit Fee Code work 85,000 85,000 85,000 94,000 EY 7

12 EY Assurance Tax Transactions Advisory Ernst & Young LLP Ernst & Young LLP. Published in the UK. All rights reserved. The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC and is a member firm of Ernst & Young Global Limited. Ernst & Young LLP, 1 More London Place, London, SE1 2AF. ey.com