Mayday Healthcare NHS TrustMayday Healthcare NHS Trust

District general hospital for CroydonDistrict general hospital for Croydon 600 beds; 130,000 A & E attendances per year600 beds; 130,000 A & E attendances per year Income £155M; 2800 WTEsIncome £155M; 2800 WTEs Croydon PCT by far biggest CommissionerCroydon PCT by far biggest Commissioner 06 – 07: small surplus; 05 – 06 £6M deficit06 – 07: small surplus; 05 – 06 £6M deficit Audit Committee (AC) meets 4 or 5 times a yearAudit Committee (AC) meets 4 or 5 times a year

I’m going to talk aboutI’m going to talk about

AC in the Mayday Governance structureAC in the Mayday Governance structure

Ways of working: issues, experience, Ways of working: issues, experience,

challengeschallenges

Mayday Governance StructureMayday Governance Structure

Trust BoardTrust Board↓↓

Board CommitteesBoard Committees

AuditAudit People and Organisation Development People and Organisation Development Remuneration Remuneration Equality and DiversityEquality and DiversityStrategy Strategy Charitable FundsCharitable FundsGovernanceGovernance

↓ ↓ Clinical GovernanceClinical Governance Environmental GovernanceEnvironmental Governance Information GovernanceInformation Governance

All above Committees chaired by Non Execs, except Clinical, Environmental and All above Committees chaired by Non Execs, except Clinical, Environmental and Information Governance Committees which are chaired by ExecsInformation Governance Committees which are chaired by Execs

Tasks of the Mayday Audit Tasks of the Mayday Audit CommitteeCommittee

Way in which Board ensures effective internal Way in which Board ensures effective internal controls are in placecontrols are in place

Provides an Provides an independent independent check on and check on and challenge to the Executive and sometimes to the challenge to the Executive and sometimes to the BoardBoard

Is Is notnot an executive body an executive body

…………more specifically, tasks covermore specifically, tasks cover

Governance, Risk Management, Internal ControlGovernance, Risk Management, Internal Control Internal AuditInternal Audit External AuditExternal Audit Other significant assurance functionsOther significant assurance functions Financial ReportingFinancial Reporting Management’s risk management and internal Management’s risk management and internal

control policies / practices / performancecontrol policies / practices / performance

…………. I’ll look at Mayday AC using these . I’ll look at Mayday AC using these headingsheadings

Governance, Risk Management, Governance, Risk Management, Internal ControlsInternal Controls

Check that appropriate Check that appropriate systems systems in place and in place and properly operated / maintainedproperly operated / maintained

Use Assurance Framework to guide workUse Assurance Framework to guide work Challenges:Challenges:

– Not AC’s job to itself take part in risk managementNot AC’s job to itself take part in risk management– Sometimes hard for NEDs to put on “independent hat”Sometimes hard for NEDs to put on “independent hat”– Includes Includes Clinical GovernanceClinical Governance: not easy, how to do this?: not easy, how to do this?– Making sure risk information processes focus on Making sure risk information processes focus on future / future /

emerging emerging risks as well as the present risks as well as the present

Ensure Effective Internal Audit (IA) Ensure Effective Internal Audit (IA) in Placein Place

Challenges:Challenges:– Ensuring we draw Ensuring we draw common threadscommon threads from IA from IA

reporting: indicators of systemic problemsreporting: indicators of systemic problems– Process for implementing, monitoring, following Process for implementing, monitoring, following

up actions on IA recommendations is up actions on IA recommendations is executive executive responsibilityresponsibility, not AC’s, not AC’s

– AC needs to ensure effective executive process AC needs to ensure effective executive process in place, and to resist temptation to “do the job in place, and to resist temptation to “do the job itself”itself”

Review Work and Findings of Review Work and Findings of External Auditors (EA)External Auditors (EA)

Challenges:Challenges:– EA not appointed by us! (Mayday’s EA is Audit EA not appointed by us! (Mayday’s EA is Audit

Commission)Commission)– Similar to IA re monitoring, follow up of actions Similar to IA re monitoring, follow up of actions

from ALE, management letter, etcfrom ALE, management letter, etc– Not easy to systematically review EA’s Not easy to systematically review EA’s

performance: this year, used completed Audit performance: this year, used completed Audit Commission QRP (quality review process) Commission QRP (quality review process) questionnaire as basis for discussion with EAquestionnaire as basis for discussion with EA

Words of Wisdom from Warren Buffet (2002 annual Words of Wisdom from Warren Buffet (2002 annual letter to Berkshire Hathaway shareholders)letter to Berkshire Hathaway shareholders)

Four fundamental questions for Audit Committees in relation to EA:Four fundamental questions for Audit Committees in relation to EA: If the EA was solely responsible for preparation of the If the EA was solely responsible for preparation of the

company’s financial statements, would the statements have company’s financial statements, would the statements have been prepared any differently from the manner selected by been prepared any differently from the manner selected by management?management?

If the EA was an investor, would he have received the If the EA was an investor, would he have received the information essential to a proper understanding of the information essential to a proper understanding of the company’s financial performance?company’s financial performance?

Is the company following the same internal audit procedure that Is the company following the same internal audit procedure that would be followed if the EA was CEO? If not, what are the would be followed if the EA was CEO? If not, what are the differences and why?differences and why?

Is the EA aware of any actions (accounting or operational) that Is the EA aware of any actions (accounting or operational) that have the purpose and effect of moving revenue or expenses have the purpose and effect of moving revenue or expenses from one reporting period to another?from one reporting period to another?

Review Work and Findings of Other Review Work and Findings of Other Significant Assurance FunctionsSignificant Assurance Functions

Challenge:Challenge:

There’s a large volume of possible material - There’s a large volume of possible material -

eg Healthcare Commission, Royal Colleges, eg Healthcare Commission, Royal Colleges,

CNST, Clinical Governance Committee.CNST, Clinical Governance Committee.

Mayday AC not systematic enough in Mayday AC not systematic enough in

addressing this material, needs to improve.addressing this material, needs to improve.

Financial ReportingFinancial Reporting

Annual Financial Statements Annual Financial Statements Reporting to Board, including budgetary control Reporting to Board, including budgetary control

and forecastingand forecasting Challenges:Challenges:

Is reporting fit for purpose?Is reporting fit for purpose?

How far should AC push executive / Board to adopt How far should AC push executive / Board to adopt particular types of reporting?particular types of reporting?

An area where the boundary between Exec and Non-An area where the boundary between Exec and Non-Exec activity needs careExec activity needs care

Management: are their risk management Management: are their risk management and internal control practices and and internal control practices and

performance satisfactory?performance satisfactory?

This is a key area, but with some hard–to-manage boundariesThis is a key area, but with some hard–to-manage boundaries

Need to monitor - and require - “right tone from the top”: Need to monitor - and require - “right tone from the top”:

means executive operational policies and practices are means executive operational policies and practices are

consistent with proper internal control and risk managementconsistent with proper internal control and risk management

Experience at Mayday: current executive management does Experience at Mayday: current executive management does

set the right tone,set the right tone, greatly assists work of ACgreatly assists work of AC

Managing AC’s PerformanceManaging AC’s Performance

Use list of self assessment questions after every Use list of self assessment questions after every

meeting (meeting (see next slidesee next slide))

Periodically use AC Handbook’s checklistPeriodically use AC Handbook’s checklist

Mayday Audit Committee Self Mayday Audit Committee Self Assessment QuestionsAssessment Questions

Did the right agenda items come to the Committee? Did the right agenda items come to the Committee? Was the appropriate amount of time given to each agenda Was the appropriate amount of time given to each agenda

item?item? Did the right papers come to the Committee?Did the right papers come to the Committee? Were the papers for the Committee clear, with the Were the papers for the Committee clear, with the

appropriate level of detail? appropriate level of detail? Were the papers issued to members in a timely manner?Were the papers issued to members in a timely manner? Did we concentrate on the right issues - policy and Did we concentrate on the right issues - policy and

important other matters that are truly the Audit Committee’s important other matters that are truly the Audit Committee’s responsibility, rather than matters of detail or issues that responsibility, rather than matters of detail or issues that should be dealt with elsewhere (for example by should be dealt with elsewhere (for example by management or by another committee)?management or by another committee)?

Did we work together satisfactorily as a team?Did we work together satisfactorily as a team?