Audit Committee
Annual Review 2014-15
1. Introduction
1.1 The Audit Committee is a committee of the Board with responsibility for providing
assurance to the Board that an appropriate system of internal control is in place
and is effective.
1.2 The NHS Audit Committee Handbook (Section 4.7) suggests that the Audit
Committee produce an annual report to the Trust’s Board setting out how it has
discharged its responsibilities and met its terms of reference during the financial
year. This Report has been prepared in line with this guidance.
2. Authority and Duties
2.1 Our key role as a Committee of the Board is set out in our Terms of Reference
(Appendix A). Our objective is to provide assurance to the Board that an
appropriate system of internal control is in place to ensure that:
 Business is conducted in accordance with the law and proper standards of
public business;
 Public money is safeguarded and properly accounted for;
 Financial Statements are prepared timeously and give a true and fair view of
the financial position of the Board for the period in question;
 Affairs are managed to secure economic, efficient and effective use of
resources; and
 Reasonable steps are taken to prevent and detect fraud and other
irregularities.
2.2 We do this by:
 Reviewing the establishment and maintenance of an effective system of
integrated governance, risk management and internal control, across the
whole of the Trust’s activities (both clinical and non-clinical), that supports the
achievement of the Trust’s objectives;
 Ensuring that there is an effective internal audit function established by
management that meets mandatory NHS Internal Audit Standards and
provides appropriate independent assurance to the Audit Committee, Chief
Executive and Board;
 Reviewing the work and findings of the External Auditor appointed by the
Audit Commission and consider the implications and management’s
responses to their work;
 Reviewing the findings of other significant assurance functions, both internal
and external to the organisation, and consider the implications to the
governance of the organisation;
 Reviewing the Financial Statements (including those of the Trust’s Charitable
Funds), including any necessary adjustments to the Accounts, and the
Auditor’s Report and recommends them to the Board for approval; and
 Reviewing and reporting to the Board on the Trust’s draft Quality Account.
2.3 Building on our work during 2013-14, our key priorities for 2014-15 were to:
 Ensure good quality accounts with clear external audit opinions;
 Ensure an effective Internal Audit Service;
 Ensure all recommendations made by auditors are taken forward promptly by
management;
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

Consider key risks facing the Trust, including our financial position; and
Develop an integrated system of governance, supported by a robust risk
register, so that risks are properly identified and managed and a risk
management culture in embedded throughout the organisation.
2.4 To take this agenda forward, and in considering information relevant to the 201415 financial year, we held the following meetings:
23rd May
2014
9th July
2014
10th
September
2014
12th
November
2014
14th
January
2015
19th March
2015
20th May
2015
Progress Reports from Internal and External audits
Going concern
Draft Accounts and Annual Report (for 2013-14)
Draft Quality Account
Head of Internal Audit Opinion
Counter Fraud Progress
Implementation of internal audit recommendations
Corporate risk assurance framework
Routine business
Corporate risk assurance framework
Implementation of internal and external audit recommendations
Internal Audit Annual Report 2013-14
Information risk
Deep dive: performance reporting in Emergency Department
Deep dive: Financial Recovery Plan 2014-15
Internal audit progress
External audit Annual Letter
Counter fraud
Routine business
Internal and External audits progress reports
Counter fraud progress report
Implementation of recommendations
Corporate risk assurance framework
Routine business
Audit Committee key issues and risks
Review of corporate risk assurance and risk appetite
ICO risk review update
Recommendations tracker
Deep dive: PWC recommendations on controls
Charitable Funds
Counter fraud progress
Internal and external audits progress reports
Future of Local Public Audit
Committee self assessment and review of terms of reference
Routine business.
Committee’s deep dive programme
Action tracker
Assurance mapping and corporate risk assurance framework
Draft Annual Report and Accounts timetable
Deep dive: complaints
Charitable Funds Annual Report and Accounts 2013-14
Counter Fraud Annual Plan
Internal and external audits progress reports
Routine business
Actions and recommendations tracker
Corporate risk assurance framework and ToRs for the Risk Assurance and Policy
Group
Fraud risk assessment
Draft Annual Governance Statement
Deep dive: Outcome of Safer Faster Week
ICO risk review update
Counter fraud progress
Draft Internal Audit Plan 2015-16
External Audit Plan
Routine business
Actions and recommendations trackers
2014-15 Annual Report and Accounts, incl Letter of Representation
Going concern
Head of Internal Audit Opinion
Internal and external audits progress reports
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External audit and value for money reports
Draft Quality Accounts
Corporate risk register and Board assurance framework
Internal Audit Charter
ICO risk review
Routine business
2.5 Members also had a separate meeting on 21st April 2015 with the Finance Team
to consider the Annual Accounts for 2014-15 in more detail.
3. Membership and Quoracy
3.1 The Committee is chaired by a Non-Executive Director of the Trust and, during
2014-15, had three additional Non Executive Directors as members who are
appointed by the Chairman. During 2014-15, members of the Audit Committee
were:
Steven Corbishley (Chair)
Godfrey Allen
Louise Cretton
John Thompson
3.2 The quoracy is two members. The Committee met 6 times between April 2014
and March 2015 and all meetings were quorate.
Name
Steven Corbishley
Godfrey Allen
Louise Cretton
John Thompson
May
√
√
√
√
July
√
√
√
√
Sept
√
√
√
x
Nov
√
√
√
x
Jan
√
√
√
√
Mar
√
√
√
√
4. Annual Review of Terms of Reference and Self Assessment of
Effectiveness
4.1 The key duties of the Audit Committee are set out in our Terms of Reference. In
November 2014, to benchmark these Terms, and our performance against them,
we applied the checklist set out in the NHS Audit Committee Handbook to assist
in determining compliance and areas for improvement.
4.2 Members and a number of our usual attendees contributed to this review. We
concluded that we complied with what the guidance expected of us and no
amendments were needed to our Terms of Reference. Members agreed that the
number of Committee meetings held had been sufficient and agendas
appropriately structured to support the effective discharge of responsibilities.
4.3 Matters considered that decisions made by the Committee were taken on an
informed basis and members agreed these decisions were understood, owned
and properly recorded and would bear scrutiny. The subsequent implementation
of decisions by management and progress had been reported back to the
Committee as required.
4.4 We also concluded that we have played an important role during the year of
raising the importance to the Trust of putting in place sound processes for
internal governance and accountability as well as expecting the best from those
who provide the Committee and the Trust more generally with advice. Given the
risks the Trust faces, and the expectations of us from those we serve and from
those who regulate us, we are even more determined to play our part in ensuring
we have sound and defensible processes in place.
November 2015 Final
4.5 We identified areas that we could usefully take forward:





More effectively engage with the work of the Finance and Performance and
Quality and Clinical Governance Committees to identify risks;
Be more robust in ensuring recommendations arising within the Committee
(such as Internal Audits) are being properly implemented;
Ensure sufficient time on the Agenda for members to discuss emerging risks
and future work programme;
Draw more from colleagues’ wider experience on clinical issues; and
Secure more effective secretarial support and timely submission of draft
minutes.
5. Reporting
5.1 Minutes of the Committee are presented to the Trust Board for consideration and
the Chair of the Committee draws the Board’s attention to any issues that require
disclosure or require Executive action.
6. Key Issues
6.1 The evidence presented to us during the year has been extensive and covered a
wide remit such as how the Trust achieves its key objectives, areas of focus
asked of us by the Board, and those of interest to the Committee’s members.
6.2 In terms of reviewing the robustness of our internal controls and governance
arrangements, we made the following observations:

The Head of Internal Audit has provided his annual overall opinion based on
the programme of work we approved at the beginning and during the financial
year (Appendix B). The opinion is that reasonable assurance can be given
that there is a generally sound system of internal control, designed to meet
our objectives, and that controls are generally being applied consistently.
However, some weakness in the design and/or inconsistent application of
controls put the achievement of particular objectives at risk. Internal audit
issued reasonable assurance opinions on most areas of work that was
undertaken during the year. However, they gave limited assurance reports on
QIPP, the Information Governance Toolkit and Cerner.

Our external auditors commented on our overall financial position and the
scale of the challenge we face. They looked at our past QIPP processes and
commented on our ability to deliver the programme. They tested whether we
could continue, in accounting terms, as a going concern and, noting the TDA
support we had, were able to conclude that they had sufficient evidence that
we were a going concern which, for their purposes, covered the period of 12
months from the date of their audit opinion. However, they qualified their
annual value for money opinion given our financial position.

The Committee challenged management on our understanding of where
assurances derive from and whether there are any gaps. Progress in
mapping out assurances we have remains in hand and we shall continue to
press for this during 2015-16.

The Committee was concerned that the way risks were reported to the
Committee, and how these risks were being mitigated, was often out of date.
This did not provide us with sufficient confidence that management was using
our risk processes to best effect in managing our business.
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
The Trust has made strides in re-designing our risk register (encompassing
both corporate and clinical risks) and how this is presented and reported to
the Committee and Board. We challenged the Trust to ensure this was
comprehensive, kept up to date and the owners of risks know what is
expected of them in managing and mitigating risks. We will continue to
monitor the effectiveness of risk management arrangements during 2015-16.

We were disappointed that much of the Committee’s time was spent
discussing with management the progress the Trust was making in taking
forward recommendations raised (and agreed with management) by Internal
Audit. We continue to monitor progress.

We recognise that our own financial statements are judged to be robust – and
this is a credit to our Finance Team. We noted the introduction towards the
end of the year of a more effective way to control the Trust’s purchase order
processes so that expenditure can be more effectively identified and
controlled. We also saw the evolution of controls over the appointment of
agency staff.

However, we have expressed concerns over management’s grip of the QIPP
programme and our ability to predict our deficit during the year and work
within this prediction. We, together with the Finance and Performance
Committee and the Board, will continue to monitor the effectiveness of our
controls in these areas.

Finally, on the process supporting the Committee’s role over the Quality
Accounts, the Committee was not able to approve the 2014-15 Accounts.
This was because the assurance process had not been fully completed at the
time the Committee was being asked to approve the Accounts and the Quality
and Clinical Governance Committee had not, at that time, had the opportunity
to consider these Accounts. We will expect the processes supporting the
2015-16 Accounts to be more effective.
6.3 In taking all these points together, we challenged management on the detail set
out in the draft Annual Governance Statement for 2014-15 presented to us. We
felt that the Statement, as initially drafted, was not appropriately transparent in
setting out the controls we had in place and how weaknesses in these controls
were being addressed. As a result of our concerns, the Board considered and
agreed a revised Statement.
6.4 From the Committee’s perspective, our challenge reflected the evidence
presented to the Committee over the last year and our concerns over the Trust’s
capacity and capability to manage key issues and the internal controls around
these. We will remain focussed on this aspect of the Trust’s, performance during
2015-16.
6.5 Finally, we have mentioned previously our concerns over management’s tracking
and reporting of risk and progress against internal audit’s recommendations. We
also had concerns over how seriously management were taking forward the
actions raised by this Committee. Much more needed to be done to facilitate the
Committee in its work, including the timely provision of papers and draft minutes.
We will continue to challenge the Trust in these areas to do much better during
2015-16.
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7. Conclusion
7.1 The Committee is of the opinion that it has effectively discharged its
responsibilities throughout the year and that there is nothing it is aware of at this
time that has not been disclosed appropriately.
7.2 The Audit Committee undertook a full programme of work and organised its
meeting agendas so as to be able to discharge its responsibilities as set out in
the Audit Committee Handbook. The areas for our further development are
highlighted above.
7.3 The Trust faces key challenges which reinforce the need for management to
ensure it has a rigorous system of internal control in place. We have expressed
our concerns that more needs to be done to demonstrate that we have such a
system in place and that it is effective.
7.4 We have also concluded that the Committee is not best served by the quality of
the submissions provided to us so that we are best able to make the
contributions we can, and should, make to the aims and objectives of the Trust.
We will continue to work with management to ensure these matters are resolved
during 2015-16.
7.5 There are challenges which this Committee will consider during 2015-16:
 The effectiveness of controls in place to improve our financial position;
 The effectiveness of controls where we work in partnership with other
organisations and where we remain accountable;
 The evolution of our risk identification and reporting arrangements; and
 Management’s tracking and implementation of audit and this Committee’s
agreed actions.
7.6 Finally, our work would not have been possible without the help and support of all
those who attend the Committee. We received a great deal of constructive help
and advice from all our colleagues, for which we are grateful. In particular, we
thank John Thompson for his invaluable contribution to the work of the
Committee.
STEVEN CORBISHLEY
Chairman of the Audit Committee, on behalf of the Committee
September 2015
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Appendix A: TERMS OF REFERENCE OF THE AUDIT COMMITTEE
Constitution
The Board hereby resolves to establish a Committee of the Board to be known as the Audit
Committee (the Committee). The Committee is a non-executive committee of the Board and
has no executive powers other than those specifically delegated in these Terms of Reference.
Purpose
The purpose of the Audit Committee is to assist the Board to deliver its responsibilities for the
conduct of public business and the stewardship of funds under its control.
The Committee shall review the establishment and maintenance of an effective system of
internal control and probity across the whole of the organisation’s activities that supports the
achievement of the organisation’s objectives.
This will be evidenced through the Committee’s use of an effective assurance framework to
guide its work and that of the audit and assurance functions that report to it.
Objectives
The Committee will provide assurance to the Board that an appropriate system of internal
control is in place to ensure that:

Business is conducted in accordance with the law and proper standards of public
business;

Public money is safeguarded and properly accounted for;

Financial Statements are prepared timeously and give a true and fair view of the financial
position of the Board for the period in question;

Affairs are managed to secure economic, efficient and effective use of resources; and

Reasonable steps are taken to prevent and detect fraud and other irregularities.
Accountability and Reporting Arrangements

The minutes of Audit Committee meetings shall be formally recorded by the secretary and
submitted to the Board. The Chair of the Committee shall draw to the attention of the
Board any issues that require disclosure to the full Board, or require executive action.

The Committee will report to the Board annually on its work in support of the Annual
Governance Statement, specifically commenting on the fitness for purpose of the Board
Assurance Framework, the completeness and effectiveness of risk management within
the Trust, the integration of governance arrangements and the appropriateness of
assessments against the Care Quality Commission’s Quality and Safety Outcomes.
Membership
The Committee shall be appointed by the Board from amongst the Non-Executive Directors of
the Trust and shall consist of not less than three Non-Executive members (with a quorum of
two members). One of the members will be appointed Chair of the Committee by the Trust
Chairman, supported by the TDA. The Chairman of the Trust shall not be a member of the
Committee.
Attendance by Others

The Director of Finance and appropriate Internal and External Audit representatives shall
normally attend the meetings. At least once a year, the Committee should meet privately
with the External and Internal Auditors.
November 2015 Final

Executive directors should be invited to attend, particularly when the Committee is
discussing areas of risk or operation that are the responsibility of that director.

The Chief Executive should be invited to attend, in particular, to discuss with the Audit
Committee the process for assurance that supports the Annual Governance Statement.

A Secretary to the Committee shall be appointed and shall attend to take minutes of the
meeting and provide appropriate support to the Chairman and Committee members.
Frequency of meetings
Meetings shall be held not less than three times a year. The External Auditor or Head of
Internal Audit may request a meeting if they, in consultation with the Chairman, consider that
one is necessary.
Authority
The Committee is authorised by the Board to investigate any activity within its terms of
reference. It is authorised to seek any information it requires from any employee and all
employees are directed to co-operate with any request made by the Committee. The
Committee is authorised by the Board to obtain outside legal or other independent
professional advice and to secure the attendance of outsiders with relevant experience and
expertise it if considers this necessary.
The Committee also has the right to commission additional work at its discretion.
Monitoring Effectiveness
The Committee shall, at least annually, review its own effectiveness and take advice, as
appropriate. It will review its accountabilities and responsibilities for the Annual Governance
Statement.
Key indicators


Regulation 10 (Outcome 16) The Health and Social Care Act 2008 (Regulated Activities)
Regulations 2010.
Codes of Conduct and Accountability 2004
Key Tasks
Governance, Risk Management and Internal Control
The Committee shall review the establishment and maintenance of an effective system of
integrated governance, risk management and internal control, across the whole of the Trust’s
activities (both clinical and non-clinical), that supports the achievement of the Trust’s
objectives.
In particular, the Committee will review the adequacy of:

all risk and control related disclosure statements (in particular the Annual Governance
Statement and declarations of compliance with the CQC standards of quality and safety),
together with any accompanying Head of Internal Audit statement, external audit opinion
or other appropriate independent assurances, prior to endorsement by the Board;

the Board Assurance Framework and the underlying assurance processes that indicate
the degree of the achievement of corporate objectives, the effectiveness of the
management of principal risks and the appropriateness of the above disclosure
statements;

the policies for ensuring compliance with relevant regulatory, legal and code of conduct
requirements;

the policies and procedures for all work related to fraud and corruption as set out in
Secretary of State Directions and as required by the Counter Fraud and Security
Management Service;
November 2015 Final

the operational effectiveness of policies and procedures;

Standing Financial Instructions (SFIs) and Standing Orders (SOs) on an annual basis;
and

Management’s corrective actions where significant weaknesses are identified. Material or
continued failure to take effective corrective action should be brought to the Board’s
attention.
In carrying out this work, the Committee will utilise the work of Internal Audit, External Audit
and other assurance functions, but will not be limited to these audit functions. It will also seek
reports and assurances from directors and managers as appropriate, concentrating on the
over-arching systems of integrated governance, risk management and internal control,
together with indicators of their effectiveness.
Internal Audit
The Committee shall ensure that there is an effective internal audit function established by
management that meets mandatory NHS Internal Audit Standards and provides appropriate
independent assurance to the Audit Committee, Chief Executive and Board. This will be
achieved by:

consideration of the provision of the Internal Audit Service, the cost of the audit and any
questions of resignation and dismissal;

review and approval of the Internal Audit strategy, operational plan and more detailed
programme of work, ensuring that this is consistent with the audit needs of the
organisation as identified in the Assurance Framework;

consideration of the major findings of internal audit work(and management’s response),
and ensure co-ordination between the Internal and External Auditors to optimise audit
resources;

ensuring that the Internal Audit function is adequately resourced and has appropriate
standing within the organisation; and

annual review of the effectiveness of internal audit.
External Audit
The Committee shall review the work and findings of the External Auditor appointed by the
Audit Commission and consider the implications and management’s responses to their work.
This will be achieved by:

consideration of the appointment and performance of the External Auditor, as far as the
Audit Commission’s rules permit, and review the implications for the Trust following the
abolition of the Audit Commission;

discussion and agreement with the External Auditor, before the audit commences, of the
nature and scope of the audit as set out in the Annual Plan, and ensure coordination, as
appropriate, with other External Auditors in the local health economy;

discussion with the External Auditors of their local evaluation of audit risks and
assessment of the Trust and associated impact on the audit fee; and

review of all External Audit reports, including agreement of the annual audit letter before
submission to the Board and any work carried outside the annual audit plan, together with
the appropriateness of management responses.
Other Assurance Functions
The Audit Committee shall review the findings of other significant assurance functions, both
internal and external to the organisation, and consider the implications to the governance of
the organisation.
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These will include, but will not be limited to, any reviews by Department of Health Arm’s
Length Bodies or Regulators/Inspectors (e.g. Care Quality Commission and NHS Litigation
Authority), professional bodies with responsibility for the performance of staff or functions
(e.g. Royal Colleges and accreditation bodies).
In addition, the Committee will review the work of other committees within the organisation,
whose work can provide relevant assurance to the Audit Committee’s own scope of work.
This will include the Quality and Clinical Governance Committee, Finance and Performance
Committee, and any other committees that are considered relevant by the Committee.
In reviewing Clinical Governance and issues around clinical risk management, the Audit
Committee will wish to satisfy them on the assurance that is gained from the clinical audit
function.
In considering the effectiveness of these wider assurance functions, the Committee may
undertake a more detailed review including asking for reports from management and
discussing these “deep dives” with relevant members of the Trust.
Management
The Committee shall request and review reports and positive assurances from directors and
managers on the overall arrangements for governance, risk management and internal control.
They may also request specific reports from individual functions within the organisation (e.g.
clinical audit) as they may be appropriate to the overall arrangements.
Financial Reporting
The Audit Committee shall review the Financial Statements (including those of the Trust’s
Charitable Funds), including any necessary adjustments to the Accounts, and the Auditor’s
Report and recommends them to the Board for approval, focusing particularly on:

the wording in the Annual Governance Statement and other disclosures relevant to the
Terms of Reference of the Committee;

changes in, and compliance with, accounting policies and practices;

unadjusted misstatements in the financial statements;

major judgemental areas;

significant adjustments resulting from the audit; and
 receive, for noting, write-offs and single tender waivers.
The Committee should also ensure that the systems for financial reporting to the Board,
including those of budgetary control, are subject to review as to completeness and accuracy
of the information provided to the Board.
Quality Accounts
The Audit Committee shall review and report to the Board on the Trust’s draft Quality
Account. The Audit Committee shall consider the rigour of the processes for producing the
quality accounts, in particular whether the information included in the quality accounts is
reported accurately and whether the quality account is representative in its reporting of the
services provided and the issues of concern to its stakeholders.
Other Matters
The Committee shall be supported administratively by the Secretary of the Committee, whose
duties in this respect will include:

Agreement of agenda with the Chairman and attendees and collation of papers;

Taking the minutes and keeping a record of matters arising and issues to be carried
forward; and
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
Advising the Committee on pertinent areas.
Following each meeting, and within ten working days, the Secretary will circulate draft
minutes and actions arising to the Committee’s members.
Review of Terms of Reference
The Terms of Reference will be reviewed annually and ratified by the Trust Board.
Sub Committee
There are no sub committees reporting to the Audit Committee.
Uploading to the Intranet
The terms of reference and meeting papers will be saved on the Compliance and Regulation
Team’s shared drive.
Ratified Date: 10 February 2015
By: Trust Board
Review Date: January 2015
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Appendix B: INTERNAL AUDIT WORK 2014-15
Audit
Assurance Level
Direction of Travel
Research Funds
Reasonable
N/A
CQC Registration
Reasonable
Patient Experience
Reasonable
Complaints
Reasonable
Medical Equipment
Reasonable




Cancer Referral Management (2 Week Waits)
Reasonable
N/A
Corporate Governance
Reasonable
Assurance Framework and Risk Register
Reasonable
Quality Accounts
Significant



Temporary Staffing
Reasonable

Consultant Appraisals and Revalidation
Reasonable
N/A
Whistleblowing
Reasonable
N/A
Reasonable
N/A
Information Governance Toolkit
Limited
Cerner
Limited


Patient Safety and Service Quality
Governance
Workforce
Estate and Facilities
Health and Safety
Information Technology and
Systems
Financial Systems and Risks
Financial Planning and Management
Reasonable
Financial Ledger
Significant
Non-Pay Expenditure
Reasonable
NHS Income
Reasonable
QIPP
Treasury Management
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Limited
Significant






November 2015 Final