Approved

NHS Grampian (NHSG) Board Meeting Minute of the Audit Committee Meeting 06 10 09 Open Session Friday 26 June, 1000-1300 Item 10.12 Conference Room, Summerfield House

Present Cllr Bill Howatson, Chair Mr David Anderson, Committee Member Mr Terry Mackie, Committee Member Mr Charles Muir, Committee Member Mr Gordon Stephen, Employee Director, NHSG

In Attendance Dr David Cameron, Chairman, NHSG Mr Barry Jenkins, Assistant Director of Finance, NHSG Mr Alan Gray, Director, PricewaterhouseCoopers (Chief Internal Auditor) Mr David McConnell, Assistant Director, Audit Scotland (External Auditor) via vidcon Mrs Linda Porter, Senior Audit Manager, Audit Scotland (External Auditor) Mr Ramsay Milne, Physical Planning, NHSG - Item 7.2 Miss Sarah Johnson, Observer Miss Anne-Marie Meconi, Minuting Secretary

Item Subject Action 1. Apologies

No apologies.

2. Minute of Meeting held on 20 May 2009

The Committee approved the Minute.

3. Matters Arising

3.1 Action Log of 20 May 2009

The Committee noted the items on the Action Sheet and their status as follows:

3. 16 09 08 - Item 4 - Backlog Maintenance: Mr Mortimer to attend the September 2009 meeting to provide a further update.

4. 16 12 08 - Item 6.3 - Patient Records Audit: PWC to provide a full review at the September meeting.

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Item Subject Action 5. 09 04 09 - Item 4.1 - Estates Stock Control: PWC to provide an update to the September 2009 meeting.

9. 20 05 09 - Item 10 - Update Audit Committee Work Programme: To be reviewed at future meetings.

3.2 Expense Claims Update

Mr Morrison provided Mr Jenkins with a brief report to offer assurance to the Committee that appropriate controls were in place around expenses.

Mr Morrison's paper informed the Committee that the introduction of e-Expenses meant that there was reduced scope for inappropriate or fraudulent expense claiming.

The paper confirmed that Payroll processes are regularly audited by both internal and external audit and that to date no significant risks have been found. Mr Jenkins also informed the committee that accommodation and travel were booked through Chambers Travel Management who held the national travel management contract which again cut down on individual’s ability to misuse the system.

The Committee noted the report.

3.3 Migrant Workers - Third Parties Assurance

Mr Jenkins went through the update provided by Mr Morrison on the issue raised by Mr Muir at the last meeting requesting assurance that third parties involved in delivering services to or on behalf of NHSG do not employ illegal immigrants.

Assurance was provided that locum and agency staff who are provided under national contract arrangements are covered by the national procurement terms and conditions that underpin these contracts including the right to work in the UK.

However for staff working for contractors or other third parties not procured through national contracts we cannot be offered that level of assurance.

Mr Morrison to provide an update to the September meeting. RM

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Item Subject Action 3.4 Report on Consultants Discretionary Points

The Committee noted the report.

3.5 Review of Medical Equipment Interim Paper

Mr Gray stated that PWC were asked to perform a review of medical equipment and this had now been completed. Mr Richard Stubbs, Head of Physical Sciences was producing an action plan based on PWC's recommendations and a full PwC report would be brought to the September meeting.

The Committee noted the interim paper.

4. Service Audits for Approval Received from NSS

4.1 Service Audit Covering Paper

Mr Gray asked the Committee to note the four service audit reports issued by NHS National Services Scotland for the year ended March 09.

- Practitioner Services Division - National IT - National Logistics - Hosting of e-Financials on behalf of NSS Shared Services Consortium

Mr Gray stated that there were no significant areas of concern for NHSG within these four audits in relation to NHS Grampian’s financial statements and all had been presented to and approved by the NSS Audit Committee.

Mr McConnell said that Audit Scotland, as the external auditors for NHS National Services Scotland, had reviewed the work that supported the audit reports and would have flagged up any issues re signing off final accounts. There were no such issues that Mr McConnell wished to raise.

Dr Cameron said that outside of the financial statements he was aware of weaknesses in controls from an operational point of view. He had concerns over accuracy of picking of orders and in the accuracy of consignments delivered to NHS Grampian. Mr Gray said that there were operational challenges and though they were relatively small they could have an impact on the

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Item Subject Action delivery of patient care. Mr Gray said that he would bring a locally targeted report back to the September meeting.

Mr Gall said that there had been problems with the national distribution centre but that most issues had now been sorted out. A lot of work had been put in by Boards and NDC and processes were improving. Mr Gray's report will give the committee further assurance.

The Committee noted the report.

Mr Gray to provide a locally targeted report to the PwC September meeting in relation to National logistics.

Mr Anderson requested that it would be helpful if Committee BJ reports said who the author was for ease of reference.

4.2 National Procurement (Logistics) Service Audit Report 2008/09 and Executive Commentary

The Committee noted the report.

4.3 SAS 70 - Services Consortium - eFinancials, 1 April 2008 - 31 March 2009

The Committee noted the report.

4.4 National IT Services Service Audit Report 2008/09 and Executive Commentary

The Committee noted the report.

4.5 Service Audit - Practitioner Services Division

The Committee noted the report.

5. Finalisation of Year End Accounts for 2008/09

5.1 Overview of the Annual Accounts

Mr Gall went through the accounts and commended the work done by Audit Scotland and the Finance Team. The accounts were in the standard format as directed by the accounts manual.

Mr Gall stated that Mr Carey would sign off the accounts at the

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Item Subject Action Board meeting which follows after this meeting today.

Mr Gall drew the Committee's attention to the following key issues.

Statement on Internal Control: On page 21 of the accounts provides assurance that the Accountable Officer has maintained sound systems of internal controls. This had been drafted with the help of internal audit and Mr Gall thanked them for their support.

Equal Pay: The wording in this paragraph was nationally agreed. The Central Legal Office were currently acting for NHSG in relation to 404 claims.

Mr Anderson queried the figures on page 15, third column, last line, which concerned Mr Stephen's pension. Mr Jenkins left the meeting to get clarification from Payroll on these figures. Mr Jenkins returned with the correct figures and page 15 was updated and inserted into the report.

Mr Gall apologised for the wrong figures appearing in the report and Cllr Howatson apologised for any embarrassment caused to Mr Stephen.

5.2 SFR 18.0 Loss Statement

Mr Jenkins went over SFR 18.0 and 18.1c which needed to be approved by the Committee prior to submission to SGHD.

Mr Gall explained ex-gratia compensation payments which occurred through loss of shoes, teeth and expensive digital hearing aids.

Compensation Payments - Legal Obligations, Line 23: Mr Gall explained that contributions to the NHS CNORIS insurance scheme had increased to £3.9m and on an annual basis there was significant volatility in this value.

Mr Jenkins to provide a covering note with the purpose of BJ SFR 18.0 and 18.1c in the future.

The Committee noted the paper.

5.3 Statement on Internal Control

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Item Subject Action

PWC had expanded the Best Value note for Mr Muir since the draft SIC had been presented at the last meeting.

The Committee noted the paper.

5.4 Report to those Charged with Governance - ISA 260

Mr McConnell said that the purpose of this report was to identify any particular items relevant to the approval of the Annual Accounts by the Board.

Mr McConnell drew the Committee's attention to and explained some of the key aspects of the report including; equal pay claims, agenda for change, revaluation reserves, annually managed expenditure and depreciation.

Cllr Howatson said that the language used in the report was difficult for a layman to understand. Mr McConnell said that this paper was not intended for the public but just for the Committee. The Annual Report covered these points and he would ensure that the comments were clearer and in simpler terms.

Annual Report to be in plainer English. DMcC

The Committee noted the paper.

5.5 Letter of Representation

Mr Gall said that this letter was in response to the ISA 260 and was intended to give assurance to external auditors on the issues they had raised. It was produced in conjunction with Auditor Scotland and they and NHSG were content with it. Mr Carey would sign on behalf of the organisation at the Board meeting.

The Committee noted the letter.

5.6 Independent Auditor's Report on the Accounts

Mr McConnell indicated that this had been covered under item

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Item Subject Action 5.4.

The Committee noted the report. 5.7 Annual Statement to NHSG Board by Audit Committee Chair

Mr Gall stated that the Audit Committee were required to evaluate the internal control environment and should provide a statement annually to NHSG's Board. The statement reflected the Committee's role to ensure that the organisation had the relevant controls in place to allow the Accountable Officer to sign the Statement on Internal Control in line with the guidance issued by the Scottish Government Health Directorate.

Cllr Howatson would present this to the Board meeting after this meeting.

The Committee noted the paper.

5.8 Recommendation to NHSG Board for the Approval of the Annual Accounts

The Committee recommended that the Board approve the accounts.

6. Internal Audit

6.1 Agenda for Change (AfC)

Mr Gray went through the report detailing the findings in relation to the audit of processes involved at the review and preliminary screening stages of the AfC project. This is the third report in a series of internal audit reviews covering the entire AfC process.

Mr Gray gave some background to the AfC process. Following evaluation of the original job descriptions considerable concerns were raised by a wide range of staff who believed that the banding outcomes from the job evaluation process were not representative of the duties and responsibilities required by their posts. In several areas, this had the potential to disrupt services through the loss of key staff and/or significant reduction in staff morale. In response to this situation, senior management within NHS Grampian held a number of ‘road show’ events across different locations to:

 explain how staff could request a review of their job

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Item Subject Action evaluation outcome

 launch the preliminary screening process and  encourage all staff with a concern to submit a request for a preliminary screening and/or review.

As at May 2009, 4,409 individual employees (including leavers) had their review and preliminary screening cases processed, with 75% resulting in a banding increase for the post holders. Based on returns made to the Scottish Government Health Directorate (SGHD) NHS Grampian would appear to have had a higher success factor than other NHS Boards. Mr Gray commented that this should however be set in the context that NHS Grampian are significantly further advanced in undertaking reviews than other NHS Boards with whom it would include in a peer group. (Copies of the correspondence between NHS Grampian’s Director of Finance and the SGHD Director of Finance (dated February 2009) in respect to queries raised by SGHD in relation to NHS Grampian’s “success rate” had been previously shared with Committee members). Mr Gray also highlighted that to oversee the audit process and provide a single point of reference for the review, a steering group consisting of the Head of HR, AfC Project Manager and Employee Director was established.

In terms of key findings Mr Gray highlighted the following matters to the Committee:

 Although the audit did not identify any instances of ‘fraudulent’ statements being made in submissions to review panels, if a number of these posts were to be independently reviewed by fully trained job matchers, the panel outcome could be challenged based on interpretation of the evidence presented.

 It was evident from interviews undertaken as part of the review that managers had indicated that the review outcome was higher than they had anticipated in a number of cases.

 The desire to secure the ‘best outcome’ for staff and the support for this approach from senior management did have a significant influence on the extent to which job evidence was developed and re-submitted. As staff, job matchers and line management had been encouraged to address the poor quality of a number of the original job descriptions and

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Item Subject Action minimise the risk of further negative feedback from staff, a more lenient approach to the inclusion of additional job information was probably taken.

Mr Gray also confirmed that the audit had been able to confirm that the processes for submission of the Job Evaluation Review Forms were undertaken in accordance with defined procedures and all Review Forms had been approved by line management.

Given the knowledge now developed within line management of the factors that contribute to banding outcomes, Mr Gray commented that it should be possible to:

 review the management structures across clinical and non clinical services to identify opportunities for combining activities and rationalising the number of post holders where banding outcomes were awarded at 8(a-d) and 9 levels; and/or

 redesign any post to transfer responsibilities to other staff or to remove the need for particular tasks altogether where this is not core to the essential duties of the post nor a key ongoing requirement to continue to support the provision of services in the relevant area. In this situation, the Organisational Change policy would apply.

Dr Cameron thanked Mr Gray for his report and stated that the audit had been requested to consider the processes involved and the robustness of the application of NHS Grampian agreed procedures in relation to the preliminary screening and Review stages.

Mr Carey indicated that review of the initial bandings had highlighted a number where the initial job matching/description process had not been applied robustly. This had caused unrest amongst staff. To address this issue senior management had been required to implement the preliminary screening and review steps timeously to minimise any potential disruption to services. Mr Carey also commented that the preliminary screening and review processes involved a subjective evaluation of evidence but that he believed the process had been applied fairly and in accordance with agreed procedures.

Mr Stephen said he wanted to remind the Committee that NHS Grampian were at the end of the process and that the outcome

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Item Subject Action within NHS Grampian could not be compared easily with other Boards who are further behind in applying this stage of the process.

Cllr Howatson asked if there were changes to the recruitment process. Mr Carey replied that all vacancies now go through an Executive Screening Panel.

Mr Muir asked if job descriptions were routine reviewed. Mr Carey said that this is not routinely done as it would be too big an exercise. Redesigning was however ongoing both when vacancies arise and as part of NHS Grampian’s ongoing continuous service improvement programme. RC Mr Carey to send John Matheson, Director of Health Finance, Scottish Government a copy of the report.

The Committed noted the paper.

7. Single Tender Register

7.1 Review of Single Tender Register

Mr Jenkins asked the Committee to approve the amended entry in the Single Tender Register regarding Braemar Community Ltd.

The Committee approved the entry.

7.2 Clarification of Position Regarding Braemar Community Centre and Appointment of WS Lippe Architects

Mr Milne gave an update to the Committee clarifying:

- confirmation that the thresholds requiring tender under the EU Official Journal regulations would not be breached by the appointment of W S Lippe Architects under the single tender process.

- clarification of the services to be provided by W S Lippe and confirmation that the fee rates negotiated were in line with market rates and represented best value for NHSG.

- clarification of the contractual relationship between NHSG and W S Lippe Architects and confirmation that the fees payable can

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Item Subject Action be directly linked to services in relation to the design and build of the Community and Medical Centre and be separated from fees payable to W S Lippe in relation to other developments on the site.

A full and thorough discussion took place.

Cllr Howatson said that the Committee must have clear assurance and would have been negligent if they had not sought this. The difficulties arose at the last meeting because there had been no clear evidence presented.

Mr Gall confirmed that he would ensure clarity was provided within the Single Tender Register from now on.

Mr Carey said that single tenders happened in very exceptional cases and only were agreed if he and Mr Gall were convinced of the case.

Cllr Howatson thanked Mr Milne for his report.

The Committee approved the Single Tender Register.

Mr Stephen and Mr Milne left the meeting.

8. Advice to SGHD Audit Committee on Significant Issues

Mr Gall confirmed that there was no significant issues that SGHD should be made aware of.

Mr Jenkins to draft a letter for Cllr Howatson to the SGHD Audit BJ Committee.

9. AOCB

No issues raised.

10. Date of Next Meeting

Tuesday 4 August 2009, 0930-1000, Committee Room 4, Woodhill House

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