COMMUNITY HEALTH AND CARE PARTNERSHIPS. Financial Planning & Budgetary Control

Transcription

1 COMMUNITY HEALTH AND CARE PARTNERSHIPS Financial Planning & Budgetary Control December 2008

2 COMMUNITY HEALTH & CARE PARTNERSHIPS Financial Planning and Budgetary Control Table of Contents Section No Section Title 1 Introduction & Background 2 Audit Remit 3 Audit Opinion 4 Conclusions 5 Recommendations 6 Recommendation for Committee 7 Acknowledgements Action Plan 8 Detailed Findings, Conclusions & Recommendations

3 Community Health & Care Partnerships Financial Planning and Budgetary Control 1. INTRODUCTION & BACKGROUND The reliability of any organisation s budgetary procedures is crucial to its success. The budget represents a model of the intended activity for the organisation and is an essential element of planning for the delivery of services and operational objectives. Budgetary control is delegated to the Community Health Care Partnerships (CHCPs) which were established in 2006 involving Glasgow City Council (GCC) and NHS Greater Glasgow and Clyde (NHSGG&C). There are 5 CHCPs within the GCC boundary and each manages a wide range of community based health and care services. The governance structure of the CHCPs is shown in the diagram below: Glasgow Glasgow City City Council Council Social Social Work Work Services Services NHS NHS Greater Greater Glasgow Glasgow and and Clyde Clyde Staff Staff Partnership Partnership Forum Forum Public Public Partnership Partnership Forum Forum CHCP CHCP COMMITTEE COMMITTEE CHCP CHCP Executive Executive Team Team Professional Professional Executive Executive Group Group Each CHCP is responsible for managing resources within budgets delegated from GCC and devolved from NHSGG&C, whose standing financial instructions govern the CHCPs. The CHCP Committee itself is not a formal decision making body of the Council. Financial information is held on two different financial ledger systems: the NHSGG&C Cedar system and the GCC SAP system. Since their inception in 2006, the five Glasgow CHCPs have been allocated total funding of 1.75 billion, equating to approximately 481million from GCC and 1.27 billion from NHSGG&C. The table below outlines reported budget variances for each Glasgow CHCP (figures shown in brackets refer to overspends).

4 2006/ /08 m /09 (as at period 5) m (0.30) (0.02) m (0.56) 0.39 CHCP Total North GCC NHS m (0.31) 0.21 West GCC NHS (0.12) 0.72 (0.49) 0.48 (0.47) 0.00 (1.08) 1.20 East GCC NHS (2.16) 1.03 (0.45) 0.00 (0.52) (0.13) (3.13) 0.9 South East GCC NHS (1.49) 0.12 (0.94) 0.42 (0.20) (0.11) (2.63) 0.43 South West GCC NHS (0.43) 0.51 (0.91) 0.27 (0.52) 0.07 (1.86) 0.85 Total GCC NHS (4.51) 2.59 (2.74) 1.37 (2.01) (0.19) (9.26) 3.77 The table highlights that GCC has recorded adverse variances in almost every CHCP in the last three years (cumulative overspend million). By contrast, NHSGG&C has recorded favourable budget results in almost all CHCPs over the last three years (cumulative underspend million) The magnitude of the funding and the variances in budgetary performance highlight the need for effective financial planning and robust budgetary control and monitoring within GCC and NHSGG&C, but more importantly within the CHCPs themselves. 2. AUDIT REMIT GCC Internal Audit and PricewaterhouseCoopers LLP (PwC), the internal audit provider for NHGGG&C, have agreed an approach and programme of joint working to audit CHCPs. This partnership approach is designed to maximise efficiencies and ensure consistency and knowledge sharing in the internal audit service provided to CHCPs. Four reviews will be completed by GCC and PwC as part of the 2008/09 Internal Audit Plan, with each focusing on two different CHCPs to ensure a complete coverage over the year. Either GCC or PwC will act as lead auditor on each review. This review was led by GCC and completed jointly with staff from both GCC and PwC. It was designed to examine the specific arrangements for financial planning and budgetary control within North Glasgow and West Glasgow CHCPs.

5 The areas reviewed included: the budget setting process, and the system for recording amendments and reconciling the annual budget; approval of budgets and nomination of the budget holders by the management; procedural instructions and financial training provided to budget holders; monitoring and reporting of the progress against the budget each financial period; and scrutiny of the reported financial position undertaken by CHCP management and partner bodies. Specifically outwith the scope of this audit was a review of the operation of the financial systems of GCC and NHSGG&C, and the organisational arrangements and financial responsibilities of both partner organisations. 3. AUDIT OPINION Based on the fieldwork carried out only limited assurance could be gained that the funding provided by GCC and NHSGG&C was consistently managed and scrutinised by CHCPs. Since the completion of the fieldwork, certain actions have already been taken by management to improve these arrangements. 4. CONCLUSIONS The key conclusions resulting from the audit can be summarised as follows: Budget Setting There is a formal sign-off process covering roles and responsibilities for the management of GCC annual budgets which has not been implemented for CHCPs. There is no identical process for NHSGG&C; The roles and responsibilities of the CHCPs are documented in various papers. Despite this the audit established that certain communication problems exist in terms of budget setting and budgetary control responsibilities, particularly between GCC and CHCPs; The link between the detailed plans and budgets of GCC and NHSGG&C to the CHCP detailed budgets should be more transparent; and Officers within CHCPs have responsibility for delegated budgets from a partner organisation, which is not their employer. This raises difficult issues of accountability which have still to be resolved despite the existence of CHCPs for almost 3 years.

6 Budget Monitoring Monitoring takes place to compare actual financial results to budgets. However, there are different budget monitoring arrangements within the CHCPs in relation to the two Partnership organisations ranging from greater central direction from GCC to greater devolved responsibility from NHSGG&C; The NHSGG&C process appears to be more transparent and efficient. There appears to be a degree of breakdown in communication between the CHCPs and GCC in relation to the requirements for budget monitoring, arrangements for processing adjustments and involvement in the probable outturn exercise; Since completion of the fieldwork, the Executive Director of Financial Services, GCC now holds 4 weekly meetings with CHCP Directors and Heads of and GCC staff to monitor and manage the GCC element of CHCP budgets. Financial Reporting The scrutiny of financial information by CHCP Committees is not consistent between the two CHCPs under review as evidenced from the minutes of North and West CHCPs. Financial Training & Procedural Instruction 5. Financial training sessions were provided for CHCP staff but not all senior executive management were present; and There is a need for procedural instructions to be issued to budget holders. RECOMMENDATIONS All of the above conclusions result in a need for action by all parties to improve the quality of budget setting, budgetary control and scrutiny. The audit work has resulted in 11 specific recommendations, 6 rated high priority, and 5 medium priority. The recommendations and management responses are contained in the Action Plan which follows. It is the responsibility of those charged with governance of the CHCPs to ensure that these recommendations are implemented on time and in full. The recommendations made are based upon the areas reviewed at the two CHCPs and consideration should be given to the applicability of these matters to all CHCPs.

7 6. RECOMMENDATION for COMMITTEE It is recommended that the Head of Audit & Inspection (GCC) and Chief Internal Auditor (NHSGG&C) submit a further report to the Audit Committees of GCC and NHSGG&C, providing an update on the implementation of the recommendations contained in this report in due course. 7. ACKNOWLEDGEMENTS We would like to thank all staff involved in this review for their co-operation, openness and assistance.

8 Action Plan COMMUNITY HEALTH & CARE PARTNERSHIPS - Financial Planning and Budgetary Control Risk Ratings for Recommendations High No. 1 2 Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. The Priority rating for each recommendation reflects its importance in establishing good governance. Recommendations Priority Accepted Service s Comments (if Officer appropriate) Responsible for Implementation Budget Setting High The Social Work Services Budget Charter: Regular meetings GCC: Executive - must be revised and agreed to reflect the between Council s Director of Social roles and responsibilities of officers in GCC Executive Director of Care and Social and CHCPs relating to budget planning and Financial Services and Work Head of monitoring, CHCPs now in place, - should make reference to all other relevant, and has led to greater CHCP: N/A agreed documentation e.g. scheme of management and virement, scrutiny of budgets to - must be signed annually by each party to CHCPs. the agreement to acknowledge acceptance of their budgetary roles and responsibilities. Recommendation not applicable to NHSGG&C. A document, similar to the GCC charter, Medium Agree to introduce a NHSGG&C: should be developed to formalise the roles written confirmation from Director of and responsibilities of the CHCPs in relation CHCP Directors to the to the NHSGG&C budget. This document Board s Director of should be signed annually by each CHCP accepting the Director on acceptance of the budget. NHS CHCP budget. CHCP: Directors This will be returned to / Heads of the Director of Timescale for Implementation March 2009 Financial year 2009/10 onwards

9 after the CHCP budget approved by CHCP Committee in June of each year. 3 GCC and NHSGG&C must conclude agreement on how to achieve accountability for budget holders. High Recommendation not applicable to GCC. Discussions ongoing between GCC and NHSGG&C Chief Executives. GCC: Chief Executive NHSGG&C: Chief Executive March 2009

10 Action Plan COMMUNITY HEALTH & CARE PARTNERSHIPS - Financial Planning and Budgetary Control Risk Ratings for Recommendations High No. 4 5 Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. The Priority rating for each recommendation reflects its importance in establishing good governance. Recommendations Priority Accepted Service s Comments (if Officer appropriate) Responsible for Implementation Budget Monitoring Evidence must be maintained, in the form of minutes, to record the attendance of staff at 4 weekly Social Work budget monitoring meetings. Minutes must be circulated timeously to all parties. Agreement over both the content and the required actions will help to ensure greater accountability. Medium Formal procedures for the communication and requesting of Social Work budget alterations should be implemented including adequate explanations for adjustments or reasons why these cannot be processed. These should be filed along with budget reports to enable a clear audit trail of all alterations from the original budget High Accepted by Social Work. Recommendation not applicable to NHSGG&C All adjustments to actuals and budgets per the monitoring process are recorded and communicated, and a clear audit trail is maintained. Formal procedures are in place for budget adjustments, and these will be reissued to all staff. Recommendation not CHCP: N/A Timescale for Implementation Immediate GCC: Social Work Head of GCC: Social Work Head of CHCP: N/A February 2009

11 applicable to NHSGG&C. 6 CHCP Heads of should be proactively involved in the Social Work probable outturn and budget setting process High This was implemented for the 2008/09 probable outturn process. Recommendation not applicable to NHSGG&C. GCC: Social Work Head of CHCP: Heads of Ongoing

12 Action Plan COMMUNITY HEALTH & CARE PARTNERSHIPS - Financial Planning and Budgetary Control Risk Ratings for Recommendations High No. 7 Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low The Priority rating for each recommendation reflects its importance in establishing good governance. Recommendations Priority Accepted Service s Comments (if Officer appropriate) Responsible for Implementation Financial Reporting Roles and responsibilities for the production and finalisation of Committee reports should be formalised, implemented and included in the Budget Charter. High Procedure currently in place, and will be incorporated into Social Work Budget Charter. A well defined process is in place for NHSGG&C to agree reports. This will continue. 8 Lower level controls absent, not being operated as designed or could be improved. CHCP committees must exercise appropriate and consistent scrutiny of financial reports and should refer any relevant matters to GCC or NHSGG&C as appropriate. High CHCP Heads of financial reports will continue to update on each CHCP s financial position. Heads of attend all CHCP Committees to present report and respond to questions as required. This practice will continue. GCC: Executive Director of Social Care Services Timescale for Implementation March 2009 NHSGG&C: Director of CHCP: Heads of CHCP: Heads of Ongoing

13 Heads of will also consider ways of developing the financial reports through consultation with Committee members to ensure they meet their needs. 9 An assessment of the requirement for the provision of training to CHCP Committee members on the requirements and responsibilities of the scrutiny function should be conducted and training provided where necessary Medium CHCP Directors and Heads of to undertake training needs assessment for Officers and Committee Members. CHCP: Directors / Heads of March 2009 onwards

14 Action Plan COMMUNITY HEALTH & CARE PARTNERSHIPS - Financial Planning and Budgetary Control Risk Ratings for Recommendations High No Key controls absent, not being operated as designed or could be improved. Urgent attention required. Medium Less critically important controls absent, not being operated as designed or could be improved. Low Lower level controls absent, not being operated as designed or could be improved. The Priority rating for each recommendation reflects its importance in establishing good governance. Recommendations Priority Accepted Service s Comments (if Officer appropriate) Responsible for Implementation Financial Training & Procedural Instruction An assessment of further officer training Medium CHCP Directors and CHCP: Directors requirements should be conducted, and Heads of to /Heads of training carried out where necessary. undertake training needs assessment for Officers and Committee Members. Medium Good practice in one CHCP should be The ongoing discussions GCC: N/A shared across all CHCPs. This should between GCC and include procedural instructions and NHSGG&C will address NHSGG&C: N/A guidance on managing budgets e.g. the these issues. budget briefing sessions carried out at North CHCP: Directors CHCP are considered to be good practice and should be replicated elsewhere. Timescale for Implementation March 2009 onwards March 2009 onwards

15 8. DETAILED FINDINGS, CONCLUSIONS and RECOMMENDATIONS 8.1 Overview The CHCPs are accountable to both GCC and NHSGG&C. Both organisations operate different financial ledger systems, and monitor on different accounting periods: NHSGG&C monitors on 12 monthly periods; and GCC monitors on 13 4-weekly periods GCC delegates budgets to the CHCPs; it has no powers to devolve budgets to them. In contrast, the budget from NHSGG&C is devolved to CHCPs NHSGG&C assigns budgets to the CHCPs on a geographical basis following the previous Primary Care allocations for those areas. In addition each CHCP has a hosted NHS service whereby they have responsibility for managing expenditure for Glasgow-wide programmes GCC Social Work monitors and reports at Care Group level (such as Children & Families) which cuts across all CHCPs The CHCP Heads of have reporting responsibility to the CHCP Director, and in addition one of the CHCP Directors is designated lead for financial matters and therefore has an involvement with all CHCP Heads of. At the time of the audit fieldwork, CHCP Heads of had indirect responsibility to senior management within GCC and NHSGG&C. Subsequently, the GCC Executive Committee agreed revised arrangements which involve financial staff continuing to be based in service departments but line managed by the Executive Director of Financial Services. The revised came into place on 1st January 2009, for two years Both GCC and NHSGG&C are in a period of severe financial funding pressure and this report should be considered in this context. 8.2 The Budget Setting Process Findings Overall CHCP budgets are set by the two Partner organisations (NHSGG&C and GCC) Although CHCP Heads of said they had no involvement in the budget setting process, the GCC Acting Head of confirmed that both the CHCP Directors and Heads of were involved in the 2008/09 budget and service planning process and the savings programme, and were given an opportunity to influence the process. The involvement of the CHCPs is consistent with the recommendation of a previous review by GCC.

16 8.2.3 CHCPs do not formally approve or accept the budget from the partner organisations. For the last two financial years, GCC has issued a Budget Charter document to the CHCPs for signature detailing the roles and responsibilities relating to budgetary control and monitoring within Social Work Services. The Budget Charter document is issued to all Social Work client groups. The CHCP Heads of consider that the current Charter document requires amendment for CHCPs The roles and responsibilities are also detailed in various policy documents, such as the Scheme of Virement. However communication problems were identified during the audit which calls into question the implementation of these roles and responsibilities There is an NHSGG&C Development Plan in place for each CHCP detailing the priorities for the year. The development plans for North and West CHCP were obtained and reviewed. However, there was no clear link between the priorities as outlined in the current Development Plan and the budget setting process for 2008/ NHSGG&C budgets are developed on an incremental basis reflecting minor variations in service delivery year on year and the majority of staff working standard hours. CHCPs can request amendments to individual budget lines, enabling them to direct funds to areas of need whilst remaining within overall break-even limits NHSGG&C do not request formal acceptance of the budget from the CHCP Directors or Heads of. In addition, the overall budgetary responsibility in relation to hosted services was not clear An exercise is currently underway to update and realign the Development Plans with the proposed budgets to ensure that services are prioritised and funds directed accordingly The two CHCPs reviewed have been given net expenditure budgets from GCC and NHSGG&C of approximately 715m over the past three years. Officers within CHCPs have responsibility for delegated budgets from a partner organisation which is not their employer which raises issues of accountability which have still to be resolved, despite the existence of CHCPs for almost 3 years. Conclusions There is a formal sign-off process covering roles and responsibilities for the management of the GCC annual budget which has not been implemented for CHCPs. There is no identical process for NHSGG&C The roles and responsibilities of the CHCPs are documented. Despite this, the audit established communication problems particularly between GCC and CHCPs.

17 The link between the detailed plans and budgets off GCC and NHSGG&C to the CHCP detailed budgets should be more transparent Officers within CHCPs have responsibility for delegated budgets from a partner organisation which is not their employer. This raises issues of accountability regarding budgets which have still to be resolved, despite the existence of CHCPs for almost 3 years. Recommendations The GCC Budget Charter: must be revised and agreed to reflect the roles and responsibilities of officers in GCC and CHCPs relating to budget planning and monitoring; should make reference to all other relevant, agreed documentation e.g. scheme of virement; and must be signed annually by each party to the agreement to acknowledge acceptance of their roles and responsibilities (action point 1) A document similar to the GCC Charter should be developed to formalise the roles and responsibilities of the CHCPs in relation to the NHSGG&C budget. This document should be signed annually by each CHCP Director on acceptance of the budget (action point 2) GCC and NHSGG&C must conclude agreement on how to achieve accountability for budget holders (action point 3). 8.3 Budget Monitoring Findings Budget monitoring meetings are held every four weeks by GCC to enable CHCP Heads of and Social Work Managers to discuss the financial performance and agree any adjustments for the period. These meetings are a key element of the budget monitoring process. GCC and CHCP staff could not agree on attendance at these meetings. There are no minutes recorded, nor is attendance recorded and it was therefore not possible to verify attendance at these meetings There are dedicated management accountants within NHSGG&C for each CHCP, working in teams of 3 ensuring constant support for each CHCP in the event of absence. The management accountants prepare the monthly budget reports and these to the Heads of. In addition they send detailed reports to the different budget holders within the CHCP. They also meet with budget holders at their request to monitor budgets, but minutes of these meetings do not appear to be maintained.

18 8.3.3 Discussion with several budget holders within North and West Glasgow CHCPs highlighted a degree of satisfaction with the clear and comprehensive information provided by NHSGG&C. They are able to request adjustments to budget lines through the year and meet regularly with the management accountants to discuss and monitor the budgets From October 2008, NHSGG&C management accountants will produce monthly reconciliations showing all adjustments to budget lines and include these in the monthly information distributed to the CHCPs Budget adjustments are also proposed by the CHCP Heads of as the need arises throughout the year. Discussion with the CHCP Heads of, budget holders and the NHS management accountants confirmed that adjustments to the NHS budgets proposed by the CHCP are processed on a timely basis The majority of budget adjustments for GCC are made by the Social Work Central Managers, who have detailed knowledge of the Care Groups. Discussion with CHCP Heads of and budget holders indicated that adjustments are often processed by the partner organisations without being formally communicated to budget holders Discussion with staff in GCC and both CHCPs indicate conflicting views on the processing of budget adjustments. There is no formal process for requesting adjustments to the budget or recording whether requests have been actioned or not. As such it was not possible to either verify whether adjustments were being processed or ascertain reasons why requests were not actioned One of the major recommendations from the previous review by GCC was that CHCP Heads of require greater support to meet the monitoring scrutiny requirements of CHCPs. GCC have established a Financial Support Unit in Social Work Services to address this issue. However, the CHCP Heads of questioned the added value that this unit provides The Probable Outturn exercise is another key element of the monitoring process and can inform the budget setting process for future years. Through discussion with the CHCP Heads of and staff within Social Work it is apparent there needs to be greater clarity in the level of involvement of the CHCPs in this process. Conclusion Monitoring takes place to compare actual financial results to budgets. However, there are different budget monitoring arrangements within the CHCPs in relation to the two partnership organisations, ranging from greater central direction from GCC to greater devolved responsibility from NHSGG&C The NHSGG&C process appears more transparent and efficient. There appears to be a breakdown in communication between the CHCPs and GCC in relation to the requirements for budget monitoring, arrangements for processing adjustments and involvement in the Probable Outturn exercise.

19 Recommendations Evidence must be maintained in the form of minutes to record the attendance of staff at four-weekly Social Work budget monitoring meetings. Minutes must be circulated timeously to all parties. Agreement over both the content and the required actions will help to ensure greater accountability (action point 4) Formal procedures for the communication and requesting of Social Work budget alterations should be implemented including adequate explanations for adjustments or reasons why these cannot be processed. These should be filed along with budget reports to enable a clear audit trail of all alterations from the original budget (action point 5) CHCP Heads of should be proactively involved in the Social Work probable outturn and budget setting process (action point 6). 8.4 Financial Reporting Findings The CHCP Committee reports for North and West Glasgow were obtained and reviewed The CHCP Heads of prepare a narrative for the CHCP Committee report to explain all significant variances from budget. A copy of the report is sent to the NHS Director of, the GCC Acting Head of and the Corporate Accountant for review. The reports are then returned to the CHCP Heads of with suggested changes and included within the papers issued to the committee clerk Discussions with the CHCP Heads of and staff within Social Work indicated a lack of clarity over final responsibility for information included in the report The minutes of North and West Glasgow CHCP committees indicate differing levels of scrutiny regarding reported figures. Where finance is often discussed and challenged in detail at the North CHCP there is no evidence that this is the case at the West CHCP The table below details the budgets and variances for West CHCP and North CHCP since financial year 2006/2007 (figures shown in brackets highlight an overspend). The difference in the level of scrutiny at the CHCPs appears to have no impact on the NHSGG&C budgets, which were underspent in 2006/07 and 2007/08, but could have contributed to large GCC overspends at West CHCP in the same period. In overall terms, West CHCP appears to have performed better than North CHCP but the variances for West CHCP are more significant.

20 West CHCP 2006/ / /09 YTD Total North CHCP 2006/ / /09 YTD Total GCC ( m) Budget Variance (0.12) (0.49) 9.94 (0.47) (1.08) NHS ( m) Budget Variance CHCP Total ( m) Budget Variance (0.01) (0.47) GCC ( m) Budget Variance (0.31) (0.30) (0.56) NHS ( m) Budget Variance (0.02) CHCP Total ( m) Budget Variance (0.10) (0.32) (0.17) Conclusion The scrutiny of financial information by CHCP Committees is not consistent between the two CHCPs under review, as evidenced from the minutes of North and West CHCPs. Recommendations Roles and responsibilities for the production and finalisation of Committee reports should be formalised, implemented and included in the budget charter (action point 7) CHCP committees must exercise appropriate and consistent scrutiny of financial reports and should refer any relevant matters to GCC and NHSGG&C as appropriate (action point 8) An assessment of the requirement for the provision of training to CHCP Committee members on the requirements and responsibilities of the scrutiny function should be conducted and training provided where necessary (action point 9). 8.5 Financial Training & Procedural Instructions Findings Financial training sessions were jointly arranged by GCC and NHSGG&C for CHCP staff. The training was provided by the Chartered Institute of Public & Accountancy between January and April From a review of the delegate list, 40 staff from all CHCPs attended the sessions. 2 of the 5 CHCP Directors and 2 of the 3 CHCP Heads of attended No procedural instructions have been issued to CHCP budget holders to provide advice on managing budgets. The Head of for North CHCP has provided budgetary briefing sessions to budget holders. However, similar sessions have not been provided at West CHCP.

21 Conclusions Financial training sessions were provided for CHCP staff but not all senior executive management were present There is a need for procedural instructions to be issued to budget holders. Recommendation An assessment of further training requirement should be conducted, and training carried out where necessary (action point 10) Good practice in one CHCP should be shared across all CHCPs. This should include procedural instructions and guidance on managing budgets e.g. the budget briefing sessions carried out at North CHCP are considered to be good practice and should be replicated elsewhere (action point 11). 8.6 Post Fieldwork Developments Since the completion of the audit fieldwork, the Executive Director of Financial Services for GCC has initiated four-weekly meetings with all CHCP Directors and Heads of and GCC staff. The purpose of these meetings is to improve the monitoring and management of the GCC element of the CHCP budgets.