BHRUT annual report 2009 - Barking Havering and Redbridge ...

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Barking, Havering & Redbridge University Hospitals NHS Trust
5. Review of effectiveness and
significant control issues
As Accountable Officer, I have responsibility for
reviewing the effectiveness of the system of internal
control. My review is informed in a number of ways.
Executive managers within the organisation, who have
responsibility for the development and maintenance of
the system of internal control, provide me with
assurance. The Assurance Framework itself provides
me with evidence that the effectiveness of controls
that manage the risks to the organisation achieving its
principal objectives have been reviewed. My review is
also informed by the Head of Internal Audit’s Opinion
on the overall arrangements for gaining assurance
through the assurance framework and on the controls
reviewed as part of the Internal Audit Plan. The
External Auditor’s Local Evaluation Assessment of the
Trust’s ‘Use of Resources’, the Trust’s self assessment
against the Healthcare Commission’s Core Standards
and its performance reporting also informs my review.
The overall opinion of the Head of Internal Audit for
2009/10 is that significant assurance can be given
on the effectiveness of internal control for financial
year 2009/10. Substantial or adequate assurance was
provided on all of the relevant areas audited, other
than for three areas: temporary staffing, creditors and
provisions & accruals, where a limited assurance
opinion was given. However, taking into account the
action taken during the year to address these areas
and the number of audits with substantial / adequate
assurance, the HOIA was able to issue the significant
assurance opinion overall.
Significant control issues identified through the
Trust’s internal review include:
Finance: The Trust posted a deficit of £22.3M in
2009/10, excluding the technical impact of fixed asset
impairments (£31.9M) and the impact of IFRS (£2.1M).
The Trust had a deficit control total of £19.7M agreed
with NHS London, which was not achieved primarily
because of a £2.6m affordability issue with the local
PCTs, in respect of additional income recognised by
the Trust in Month 12, above the forecast outturn
previously projected by the Trust at Month 11.
As a result of the deficit incurred in 2009/10, the Trust
failed its statutory break-even duty at the end of the
financial year. This resulted in the raising of a s19
Report by the Audit Commission. Under s19 of the
Audit Commission Act 1988, an auditor of a health
service body annual accounts is required to refer the
body to the Secretary of State where there is reason to
believe that the body or an officer of the body is:
(i)
about to make, or has made, a decision which
involves or would involve the incurring of
expenditure which is unlawful, or
(ii) is about to take, or has taken, a course of
action which, if pursued to its conclusion,
would be unlawful and likely to cause a loss or
deficiency.
The Trust first incurred a material deficit in 2005/06
which marked the date of the statutory break even
period. The break even duty requires a Trust to ensure
that its revenue is not less than sufficient (taking one
financial year with another) to meet its outgoings.
The duty is met if, taking a rolling three year period,
expenditure is covered by income. From 2005/06 the
Trust would have been expected to achieve a breakeven
position by March 2008. However, Trust gained
agreement with the Strategic Health Authority to
extend its break even duty over a five year period,
thereby requiring it reach break even by March 2010.
Since 2005/06 the Trust has returned a deficit each
year.
The Trust has therefore been referred to the Secretary
of State because of the failure of its breakeven duty.
The Trust is currently in discussion with the Challenged
Trust Board (CTB) of London PCTs, as part of the
London PCTs’ Medium Term Financial Strategy (MTFS),
to agree a plan which will fund historic deficits, which
stood at £95M at 31st March 2009, plus the 2009/10
deficit of £22.3M (excluding the technical impact of
fixed asset impairments and the impact of IFRS).
The auditor is also required (under s8 of the 1988 Act)
to consider whether to issue a report in the public
interest on any significant matter coming to his notice
in the course of an audit and to bring the matter to
the attention of the audited body and the public.
Annual Accounts