HEALTHCARE
ISA 260 Audit
Highlights
Memorandum
Four months ended
31st March 2009
Wrightington Wigan & Leigh
NHS Foundation Trust
26 May 2009
AUDIT
Contents
Page
The contacts at KPMG
in connection with this
report are:
Andrew Bostock
Director
KPMG LLP (UK)
Executive summary
2
Use of Resources
3
Accounts and Statement on Internal Control
4
Appendices
6
Tel: 0121 232 3215
Fax: 0161 232 3694
[email protected]
Jillian Burrows
Audit Senior Manager
KPMG LLP (UK)
Tel: 0161 246 4705
Fax: 0161 838 4035
[email protected]
Rob Jones
Audit Manager
KPMG LLP (UK)
1.
2.
3.
4.
Proposed audit opinion
Recommendations
ISA 260 Communication of Audit Differences
ISA 260 Declaration of independence and objectivity
Tel: 0161 246 4314
Fax: 0161 838 4035
[email protected]
This report is addressed to Wrightington Wigan & Leigh NHS Foundation Trust (‘the Trust’) and has been
prepared for your use only. We accept no responsibility towards any member of staff acting on their
own, or to any third parties. Monitor has issued a document entitled Audit Code for NHS Foundation
Trusts. This summarises where the responsibilities of auditors begin and end and what is expected from
the Trust. We draw your attention to this document.
External auditors do not act as a substitute for the Trust’s own responsibility for putting in place proper
arrangements to ensure that public business is conducted in accordance with the law and proper
standards, and that public money is safeguarded and properly accounted for, and used economically,
efficiently and effectively.
If you have any concerns or are dissatisfied with any part of KPMG’s work, in the first instance you
should contact Andrew Bostock, who is the engagement lead to the Trust, telephone 0121 2323215 or
email [email protected] who will try to resolve your complaint.
© 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
1
Section one
Executive Summary
Introduction
Monitor’s Code of Audit Practice (‘the Code’) requires us to provide a summary of the work we have carried out to
discharge our statutory audit responsibilities to those charged with governance at the time they are considering the
financial statements. This report summarises the key issues we have identified during our audit of the financial
statements and will be presented to the Audit Committee on 3 June 2009.
Respective responsibilities of the auditor and the Trust
Accounts and Statement on Internal Control (SIC)
The Trust is responsible for putting into place systems of internal control to ensure the regularity and lawfulness of
transactions, to maintain proper accounting records and to prepare financial statements that give a true and fair
view of its financial position and its expenditure and income. It must also publish a SIC with its financial statements.
We audit the financial statements and give our opinion as to whether they give a true and fair view of the Trust’s
financial position and its expenditure and income. We also certify whether they have been prepared in accordance
with relevant accounting policies directed by the Secretary of State in England and with the guidance provided in the
Monitor financial reporting manual (FReM). In addition we give an opinion as to whether the content of the Annual
Report is consistent with the statements and whether the part of the Remuneration Report that is required to be
audited has been properly prepared. We also conduct a high level review of the SIC and consider whether it is
consistent with the financial statements and complies with NHS guidance.
Our proposed opinion on the accounts is presented in Appendix 1.
Use of Resources
The Trust is responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in
its use of resources and regularly reviewing their adequacy. Our responsibility is to satisfy ourselves that you have
proper arrangements in place by reviewing and, where appropriate, examining relevant evidence and reporting on
these arrangements.
We reflect our judgements from the use of resources work in the certification of the financial statements. Our
certificate provides a positive assurance on the Trust’s arrangements for achieving economy, efficiency and
effectiveness in its use of resources.
Public Interest Reporting
In auditing the accounts of an NHS foundation trust, auditors must consider:
z whether, in the public interest, they should make a report on any matter coming to their notice in the course of
the audit, in order for it to be considered by Trust members or brought to the attention of the public; and
z whether the public interest requires any such matter to be made the subject of an immediate report rather than at
the conclusion of the audit.
There are no matters in the public interest that we wish to raise at this time.
Certificate
We are required to certify that we have completed the audit in accordance with the requirements of the Code. If
there are any circumstances under which we cannot issue a certificate, then we must report this to those charged
with governance. There are no issues that would cause us to delay the issue of our certificate of completion of the
audit.
Recommendations
In the course of our audit work we have made a number of recommendations which would assist the Trust in
improving performance. Key issues raised are set out below and these are detailed in Appendix 2:
z The Trust should ensure that labour costs are only capitalised in instances where all of criteria of FRS 7 and
FRS 15 have been met and retain a detailed audit trail to support this decision.
z The Trust should implement controls to ensure that any system weaknesses within the Ascribe system are
identified and rectified effectively.
z The Trust must ensure that income in relation to teaching positions is only recognised where all conditions have
been met in relation to the funding agreement and that this can be evidenced.
© 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
2
Section two
Use of Resources
As a result of our work, we are satisfied that Wrightington Wigan & Leigh NHS Foundation Trust has
made proper arrangements for securing economy, efficiency and effectiveness in its use of resources for
the period ending 31 March 2009.
One of our duties is to assess whether you have set up appropriate performance management arrangements. In
part, this means considering whether you use your resources economically, efficiently and effectively. Our
assessment is based on the following work streams:
z SIC: We review your SIC to confirm whether it is consistent with our understanding of your operations.
z The work of other regulators: We consider the work of relevant regulatory bodies, (e.g. Monitor), to determine
if their work has an impact on our responsibilities.
z Mandated work: We consider the results of any mandated Healthcare Commission work.
z Other work: We perform other work that we regard as necessary to enable us to conclude on whether you have
effectively, efficiently and economically exercised your functions.
Findings from this work are summarised below:
Element of work
Key findings
We reviewed the 2008/09 SIC and took into consideration the work of internal audit.
SIC
We confirm that it reflects our understanding of the Trust’s operations and risk
management arrangements.
Reviewing the work of
other regulators
We have ensured that the outcomes of any reviews by other regulatory bodies have
been considered when developing the scope of our work.
Mandated work
There were no reviews mandated by the Healthcare Commission in 2008/09.
We reflect our overall judgement from the use of resources work in the certification of the financial statements. Our
certificate provides a positive assurance on the Trust’s arrangements for achieving economy, efficiency and
effectiveness in its use of resources.
© 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
3
Section three
Accounts and Statement on Internal Control
We have completed the audit work on the accounts and remuneration report to the deadline and will issue
an unqualified audit opinion following the Audit Committee meeting on 3 June 2009. In this section we
draw to your attention the representation letter that we are requesting.
Introduction
To review your financial statements we perform tasks split between those which are undertaken before, during and
after the accounts production. These are summarised below:
Work Performed
Accounts production stage
Before
During
After
1. Business Understanding: review your operations.
3
3
-
2. Controls: assess the control framework.
3
-
-
3. PBC: issue our prepared by client request.
3
-
-
4. Accounting standards: agree the impact of any new accounting standards.
3
3
-
5. Accounts Production: review the accounts production process.
3
3
3
6. Testing: test and confirm material or significant balances and disclosures.
-
3
-
7. Representations & opinions : seek and provide representations before issuing
our opinions.
3
3
3
We have completed the first six stages of the process. Adjustments and recommendations resulting from stage six
are detailed in Appendix 2. In the next two sections we focus on stages five and seven;
Accounts Production
We have considered the production process against three criteria:
Element
Commentary
Completeness of draft
accounts
We received complete draft accounts on 23 April in accordance with Monitor’s deadline.
Quality of supporting
working papers
Response to audit queries
The Trust’s working papers to support the financial statements were of a good quality and
provided efficiently in an electronic form.
We have held a debrief with the Finance management team to share views on the final accounts
audit.
Trust finance staff were available throughout the audit visit to answer our queries as they arose.
We thank the finance team for their full co-operation throughout the visit.
We have raised three recommendations which are included in Appendix 2.
© 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
4
Section three
Accounts and Statement on Internal Control (continued)
Representations and Opinions
You are required to provide us with representations on specific matters such as your financial standing and whether
the transactions in the accounts are legal and unaffected by fraud.
Adjustments to the Accounts
Under the requirements of ISA 260 Communication of audit matters with those charged with governance, we are
required to report any adjusted material audit differences arising from our work. We are pleased to report that there
were no material adjustments identified in the course of our work.
We are also required to report any unadjusted audit differences, other than those that are “clearly trivial” (if there are
any) to the Audit Committee. We are pleased to report that there were no unadjusted audit differences identified in
the course of our work.
Independence and Objectivity
ISA 260 also requires us to make an annual declaration that we are in a position of sufficient independence and
objectivity to act as your auditors. We have provided this declaration at Appendix 4.
Next Steps
Following consideration of these issues, the Audit Committee will now need to recommend to the Board of Directors
that they sign the management representations letter at the Board meeting on 3rd June 2009.
Once we have received your representations we issue our audit opinion. For 2008/09 this provides confirmation
that:
z your financial statements present a true and fair view;
z you have complied with Monitor’s disclosure requirements set out in the NHS Foundation Trust Financial
Reporting Manual in the preparation of your Statement on Internal Control and we are not aware of any
inconsistencies with the information that you have recorded within this statement and our other work;
z we have read your Annual Report and in our view it does not contain information which is inconsistent with your
financial statements; and
z the numerical part of your Remuneration Report has been presented in a way which complies with the
accounting requirements as set out in Monitor’s NHS Foundation Trust Financial Reporting Manual.
© 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
5
Appendices
Appendix 1: Proposed Audit Opinion
Auditors’ Report to the Board of Governors of Wrightington, Wigan and Leigh NHS Foundation Trust
We have audited the financial statements of Wrightington, Wigan and Leigh NHS Foundation Trust for the period ended 31 March 2009 under
the National Health Service Act 2006. These comprise the Income and Expenditure Account, the Balance Sheet, the Cash flow Statement, the
Statement of Total Recognised Gains and Losses and the related notes. These financial statements have been prepared under the accounting
policies relevant to NHS Foundation Trusts set out therein.
This report is made solely to the Board of Governors of Wrightington, Wigan and Leigh NHS Foundation Trust (‘the Trust’), as a body, in
accordance with the National Health Service Act 2006. Our audit work has been undertaken so that we might state to the Board of Governors
of the Trust, as a body, those matters we are required to state to it in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the Trust and the Trust's Governors as a body, for our audit
work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As described on page XX the Accounting Officer is responsible for the preparation of the financial statements in accordance with directions
issued by Monitor. Our responsibilities, as independent auditors, are established by statute, the Code of Audit Practice issued by Monitor and
our profession’s ethical guidance.
We report to you our opinion as to whether the financial statements give a true and fair view of the state of affairs of the Trust and its income
and expenditure for the period ended 31 March 2009.
We review whether the statement on internal control on pages X to X reflects compliance with Monitor’s guidance issued in the NHS
Foundation Trust Financial Reporting Manual. We report if it does not meet the requirements specified by Monitor or if the statement is
misleading or inconsistent with other information we are aware of from our audit of the financial statements. We are not required to consider,
nor have we considered, whether the directors’ statement on internal control covers all risks and controls. We are also not required to form an
opinion on the effectiveness of the Trust’s corporate governance procedures or its risk and control procedures. Our review was not performed
for any purpose connected with any specific transaction and should not be relied upon for any such purpose.
We read the information contained in the Annual Report and consider the implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the statement of accounts.
Basis of audit opinion
We conducted our audit in accordance with the National Health Service Act 2006 and the Code of Audit Practice issued by Monitor, which
requires compliance with relevant auditing standards issued by the Auditing Practices Board.
An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes
an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of
whether the accounting policies are appropriate to the Trust's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us
with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by
fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the
financial statements.
Opinion
In our opinion:
•
the financial statements give a true and fair view, in accordance with the accounting policies directed by Monitor as being relevant to NHS
Foundation Trusts in England, of the state of the Trust’s affairs as at 31 March 2009 and of its income and expenditure for the period then
ended; and
•
the part of the Remuneration Report to be audited has been properly prepared in accordance with the requirements of the NHS Foundation
Trust Financial Reporting Manual.
Certificate
We certify that we have completed the audit of the accounts in accordance with the requirements of the National Health Service Act 2006 and
the NHS Foundation Trust Audit Code of Practice issued by Monitor.
Andrew Bostock (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St James Square
Manchester
3 June 2009
© 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
6
Appendices
Appendix 2: Recommendations
We have given each of our recommendations a risk rating as explained below and agreed with management what
action you will need to take. The table also includes recommendations on systems and controls. We will follow up
our recommendations as part of next year’s audit.
Priority rating for recommendations raised
High risk: issues that are fundamental
and material to your system of internal
control. We believe that these issues
might mean that you do not meet a
system objective or reduce (mitigate) a
risk.
No.
Risk
Medium risk: issues that have an
important effect on internal controls but
do not need immediate action. You
may still meet a system objective in full
or in part or reduce (mitigate) a risk
adequately but the weakness remains
in the system.
Issue and recommendation
Low risk: issues that would, if
corrected, improve the internal control
in general but are not vital to the overall
system. These are generally issues of
best practice that we feel would benefit
you if you introduced them.
Management response
Manager and due date
Review of Capitalised Labour Costs
1
The Trust’s capital additions balance included
£187k of labour costs capitalised during the
period relating to individuals who aided in the
completion of the Trust’s Data Warehouse
Project. Our work identified that there was an
insufficient audit trail to support the Trust’s view
that these costs met all of the criteria set out
within FRS15.
Going forward the Trust should ensure that
labour costs are only capitalised where costs are
wholly attributable to the development of an asset
and would not have been incurred if it were not
for the development of the asset.
Review of the Ascribe System
Our work on stock accruals identified that the
Trust’s Ascribe pharmacy stock system raised an
incorrect order value that required management
intervention to prevent the error from impacting
upon the stock value within the accounts.
2
The Trust’s explanation for the error indicates
that the issue could occur again in the future. We
recommend that a technical review of the system
takes place to identify the cause of the problem
and to address it. In the meantime, compensating
controls must be implemented to ensure regular
review of orders raised by the Ascribe system.
Review of Income
3
During our analytical review of income, we
reviewed £120k of funding received from the
SHA for a training position. The income was
recognised in year despite the fact that the post
had not been filled at year end.
The Trust should ensure that wherever funding is
received it should only be recognised once the
conditions attached to it have been met,
otherwise the income should be deferred until
conditions are met.
© 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
7
Appendices
Appendix 3: ISA 260 Communication of Audit Differences
We are required by ISA (UK and Ireland) 260 Communication of Audit Matters to Those Charged with Governance to
communicate all uncorrected misstatements, other than those that we believe are clearly trivial, to those charged with
governance. We are also required to report all material misstatements that management has corrected but that we believe
should be communicated to the Audit Committee to assist it in fulfilling its governance responsibilities.
This appendix sets out the audit differences that we identified following the completion of our audit of Wrightington Wigan &
Leigh NHS Foundation Trust for the period ended 31 March 2009.
Unadjusted audit differences
We are pleased to report that there were no unadjusted audit differences arising from our work.
Adjusted audit differences
We are pleased to report that there were no material adjustments arising from our work and that no immaterial adjustments
required correction by management.
Presentational issues
We did identify a number of minor presentational issues during our audit and these have all been amended by the Trust.
Issues relating to the final accounts audit
In the course of our final accounts audit we have also identified three recommendations relating to systems and processes in
operation at the Trust. We have highlighted all these issues in Appendix 2 to allow action to be taken in good time for the
2009/10 audit process.
© 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
8
Appendices
Appendix 4: ISA 260 Declaration of Independence and Objectivity
Declaration of Independence and Objectivity 2008/09
The purpose of this Appendix is to communicate all significant facts and matters that bear on KPMG LLP’s independence and
the objectivity and to inform you of the requirements of ISA 260 (UK and Ireland) Communication of Audit Matters to Those
Charged with Governance.
Integrity, objectivity and independence
We are required to communicate to you in writing at least annually all significant facts and matters, including those related to the
provision of non-audit services and the safeguards put in place that, in our professional judgement, may reasonably be thought
to bear on KPMG LLP’s independence and the objectivity of the Audit Partner and the audit team.
We have considered the fees paid to us by the Trust for professional services provided by us during the reporting period. We
are satisfied that our general procedures support our independence and objectivity.
General procedures to safeguard independence and objectivity
KPMG LLP is committed to being and being seen to be independent. As part of our ethics and independence policies, all
KPMG LLP Audit Partners and staff annually confirm their compliance with our Ethics and Independence Manual including in
particular that they have no prohibited shareholdings.
Our Ethics and Independence Manual is fully consistent with the requirements of the Ethical Standards issued by the UK
Auditing Practices Board. As a result we have underlying safeguards in place to maintain independence through: Instilling
professional values, Communications, Internal accountability Risk management and Independent reviews.
We would be happy to discuss any of these aspects of our procedures in more detail. There are no other matters that, in our
professional judgement, bear on our independence which need to be disclosed to the Board of Governors.
Audit matters
We are required to comply with ISA (UK and Ireland) 260 Communication of Audit Matters to Those Charged with Governance
when carrying out the audit of the accounts.
ISA 260 requires that we consider the following audit matters and formally communicate them to those charged with
governance:
z
Relationships that may bear on the firm’s independence and the integrity and objectivity of the audit engagement director
and audit staff.
z
The general approach and overall scope of the audit, including any expected limitations thereon, or any additional
requirements.
z
The selection of, or changes in, significant accounting policies and practices that have, or could have, a material effect on
the Trust’s financial statements.
z
The potential effect on the financial statements of any material risks and exposures, such as pending litigation, that are
required to be disclosed in the financial statements.
z
Audit adjustments, whether or not recorded by the entity that have, or could have, a material effect on the Trust’s financial
statements.
z
Material uncertainties related to event and conditions that may cast significant doubt on the Trust’s ability to continue as a
going concern.
z
Disagreements with management about matters that, individually or in aggregate, could be significant to the Trust’s financial
statements or the auditor’s report. These communications include consideration of whether the matter has, or has not, been
resolved and the significance of the matter.
z
Expected modifications to the auditor’s report.
z
Other matters warranting attention by those charged with governance, such as material weaknesses in internal control,
questions regarding management integrity, and fraud involving management.
z
Any other matters agreed upon in the terms of the audit engagement.
We continue to discharge these responsibilities through our attendance at audit committees, commentary and annual audit letter
and, in the case of uncorrected misstatements, through our request for management representations.
Auditor Declaration
In relation to the audit of the financial statements of Wrightington, Wigan and Leigh NHS Foundation Trust (‘the Trust’) for the
four months ending 31 March 2009, we confirm that there were no relationships between KPMG LLP and the Trust, its directors
and senior management and its affiliates that we consider may reasonably be thought to bear on the objectivity and
independence of the audit engagement lead and audit staff. We also confirm that we have complied with Ethical Standards in
relation to independence and objectivity.
© 2009 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member
firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. This document is confidential and its circulation and use are restricted.
KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
9