Financial Audit of Central Government and NHS Bodies in Wales 2007 _part3 ppt

21Financial Audit of Central Government and NHS Bodies in Wales 2007 3.11 In December 2006, the Assembly Government implemented two new financial systems - 'E-purchases' (a purchase ordering system) and 'E grants' (a system for tracking grants payable) - designed to improve the quality and timeliness of resource-based financial information available to sub-accounting officers in controlling their budgets. 3.12 Accurate and timely financial information should be made available and utilised throughout the year, and not just to support the production of year-end accounts. The systems recently implemented are intended to support the Assembly Government's intention to improve the financial information available on a routine basis to support its business activities and decision-making. Further progress still needs to be made, however, to ensure that the systems in place will deliver the full range of benefits available from resource accounting. My staff will continue to work with and advise the Assembly Government in taking forward developments in this area. The Whole of Government Accounts project requires sound financial systems that provide prompt and accurate financial information 3.13 The aim of HM Treasury's Whole of Government Accounts project is to produce a set of commercial style consolidated accounts for the whole of the public sector across the United Kingdom. It will make available for the first time comprehensive audited public sector information, based upon generally accepted accounting principles. This will support enhanced policy formulation and resource allocation, and should contribute significantly to fiscal management. The 2007 Budget Report announced that the 2008/2009 set of Whole of Government Accounts will be the first to be published. Better use of resource accounting will help to enhance financial and risk management Resource accounting is the application of accruals based methods for reporting on the expenditure of central government bodies and a framework for analysing that expenditure against business objectives, relating this to outputs wherever possible. It means, for example, that it is when a transaction occurs that determines when it is brought to account rather than the period in which the related cash is received or paid. Financial statements prepared on an accruals basis therefore provide a more accurate record of resources expended. More regular use of accruals based accounting information by public sector organisations will bring several benefits: Bodies will have access to regular accruals based management accounts. These will inform managements' decision making process, providing a clearer picture of an organisations actual performance. Regular reviews of accruals based management information will assist risk management by providing better early warning signs of possible over or under spends. Closedown procedures in an organisation producing regular accruals based information will be more efficient, assisting bodies to meet Treasury's faster closing initiative, and the Whole of Government Accounts time-table. The faster closing initiative ensures that audited information is made available earlier, providing the users of public sector accounts with more up to date and relevant information. Finance 2.qxp 20/06/2007 16:49 Page 21 This is trial version www.adultpdf.com 22 Financial Audit of Central Government and NHS Bodies in Wales 2007 3.14 As part of the Whole of Government Accounts process, the Assembly Government is responsible for preparing sub-consolidations of financial information in Wales provided by central government bodies (including the Assembly Government itself), NHS trusts and local authorities. The sub-consolidations are submitted by the Assembly Government to HM Treasury and audited by the Wales Audit Office. There will also in future be a separate Whole of Government of Wales Account, prepared under the Government of Wales Act 2006, although a date for its first publication is yet to be determined. 3.15 The requirement each year for audited bodies to complete Whole of Government Accounts information within a strict timetable is also reinforcing the benefits of faster closing of accounts. 3.16 My audit work on the 2005/2006 Whole of Government Accounts submissions by audited bodies was undertaken on a 'dry-run' basis. While the dry-run process generally went successfully, my audit highlighted a failure by some bodies to accurately disclose their transactions and balances with other public sector bodies. This information is essential as it has to be eliminated from the consolidated Whole of Government Accounts to prevent double counting of transactions and balances. 3.17 The accurate identification and agreement of transactions and balances between public bodies is probably the most significant risk associated with the Whole of Government Accounts process. Having arrangements in place to do this should, in any case, be part of sound financial management. Organisations will need to establish better systems to identify relevant transactions and balances throughout the financial year, and become more proactive in securing agreements with other public sector bodies on amounts so that accurate information can reported. 3.18 My staff will continue to work closely with officials of the Assembly Government in improving the guidance available to auditors and audited bodies in this area. I also welcome the contribution that the Wales Audit Office is making to a Whole of Government Accounts working group of the Public Audit Forum. This forum brings together auditors from across the UK of all bodies involved in auditing Whole of Government Accounts including other National Audit Agencies, the Audit Commission, and representatives from the private sector firms. NHS bodies are currently meeting risk management standards but face new challenges in relation to new healthcare standards and governance review 3.19 Effective risk management should represent an integral part of corporate governance arrangements within public sector bodies in Wales. It is needed in order to ensure that organisations can successfully manage the internal and external risks that they face as an organisation. All audited bodies have continued to make good progress in developing their risk management systems. 3.20 NHS bodies have an additional requirement to complete a self-assessment each year against the Welsh Risk Management (WRM) standards. Governance is a specific standard against which bodies are assessed, and this examines the use and review of risk registers; how well risk management is embedded within the organisation; and sub-committees setup to oversee Corporate Governance. NHS bodies are expected to achieve a target of 75 per cent against this standard, and all Finance 2.qxp 20/06/2007 16:49 Page 22 This is trial version www.adultpdf.com 23Financial Audit of Central Government and NHS Bodies in Wales 2007 36 bodies successfully met this requirement in 2005/2006. I am also satisfied that overall NHS bodies are making good use of risk registers in their business operations. 3.21 NHS bodies currently face further significant challenges in respect of their corporate governance systems. These include the implementation of new health care standards, and a detailed review of their current governance frameworks. 3.22 The new framework of health care standards outlined in Figure 9 will come into force in 2006/2007, as part of the ‘Making the Connections’ agenda. 3.23 NHS bodies in Wales will need to review their systems in all areas to ensure that they have the necessary procedures in place to meet the requirements of and report on these standards. 3.24 The Director of NHS Wales has also commissioned a review of corporate governance within the NHS in Wales to determine whether the NHS is evolving in such a way as to meet the challenges ahead. The review is being undertaken by the National Leadership and Innovation Agency for Healthcare (NLIAH) with support from the Wales Audit Office. Figure 10 sets out the Terms of Reference for the review. 3.25 I encourage all NHS bodies to take an active part in the review, and to consider in detail any recommendations that may arise. I will also want to consider the results of the review on its conclusion. New Risk Management Standards The Patient Experience Services should be user friendly, patient centred, and reflect the diverse needs and preferences of the community From April 2007 healthcare organisations in Wales will be required to undertake self-assessments against these new standards, which will then be validated by the Healthcare Inspectorate Wales. Whilst 2007 will be a development year for this work, in future years these standards will be used to inform and be reported in the Statement of Internal Control and the Annual Reports. The intention is that the current WRM standards will be incorporated into the new Healthcare Standards. Clinical Outcomes Services should be delivered as promptly as possible Healthcare Governance Systems should be in place to support both managerial and clinical leadership Public Health Healthcare organisations should collaborate with relevant organisations and local communities to ensure effective design and delivery of programmes Figure 9: NHS bodies will be assessed against new risk management standards in 2006/2007 Finance 2.qxp 20/06/2007 16:49 Page 23 This is trial version www.adultpdf.com 24 Financial Audit of Central Government and NHS Bodies in Wales 2007 The establishment of the Welsh Consolidated Fund and National Assembly for Wales Commission present opportunities for locally accountable Welsh spending as well as associated risks which the Auditor General will help the Welsh Assembly Government to manage 3.26 The Government of Wales Act 2006 received Royal Assent on 25 July 2006 and came into effect following the May 2007 Assembly elections. The Act abolished the former Assembly corporate body and reconstituted the National Assembly as an unincorporated association; as such it no longer has any government functions. These functions now rest with the Assembly Government, an entity that is legally separate from the National Assembly. Welsh Consolidated Fund 3.27 The Act established a Welsh Consolidated Fund (the Fund) from which the Assembly Government and other bodies draw down funds. The Parliamentary grant provided by the Secretary of Sate for Wales is paid into the Fund. 3.28 Payments out of the Fund are intended to meet the costs of the Assembly Government’s programmes, and need to be authorised either via an Annual or Supplementary Budget Motion of the Assembly. Each budget motion specifies the amount of resources that may be used; the amounts of accruing resources that may be retained; and the amounts of cash that may be issued from the Fund. 3.29 The Auditor General is required to give an approval to draw down all sums payable from the Fund and must be satisfied that each payment is in accordance with the relevant budget resolution. National Assembly Commission 3.30 The National Assembly Commission (the Commission) is a new corporate body established under the 2006 Act. This body is now responsible for providing the National Assembly with property, staff and services. 3.31 The former Assembly recognised that there were significant risks to be managed in creating the new Commission out of the former Assembly Parliamentary Services department. In particular, as a separate corporate body the Commission needed to establish its own corporate governance and financial management arrangements. Figure 10: The NLIAH review will assist NHS bodies to further develop their corporate governance systems by Providing a baseline assessment for the Director, NHS Wales as Accounting Officer, on the standards of corporate governance embedded and operating at Board level in the NHS in Wales; Advising the Director, NHS Wales on how the existing governance framework can be improved, and on options for future reform of the governance and accountability structure; Helping NHS Boards to discharge their responsibilities effectively by working with them to develop and roll out a tailored governance development programme designed to enhance Board level skills and strengthen the corporate governance framework within their organisations; and Contributing to the development of a more effective and joined-up framework for board members across the public sector in Wales, contributing to taking forward the recommendations of the Beecham Report 'Beyond Boundaries'. Finance 2.qxp 20/06/2007 16:49 Page 24 This is trial version www.adultpdf.com 25Financial Audit of Central Government and NHS Bodies in Wales 2007 3.32 In May 2006 a Shadow Commission was established as an advisory committee to the former Assembly. Its brief was to review and recommend governance and financial arrangements for the new Commission. 3.33 At the first meeting of the Commission following the elections, specific governance and financial management proposals were formally presented and approved. However, risk management arrangements are yet to be fully developed and the new Commission will need to embed these into its day to day operations as soon as possible. 3.34 I look forward to working with the newly formed Assembly and its corporate bodies, and to continuing the productive relationship I have always had with Assembly Government management. Finance 2.qxp 20/06/2007 16:49 Page 25 This is trial version www.adultpdf.com 26 Financial Audit of Central Government and NHS Bodies in Wales 2007 This Report covers the results of the examination of all of the 2005/2006 accounts prepared by the National Assembly and the other public bodies that I audit. A complete listing is given below: Accounts prepared by the National Assembly Assembly Core Resource account Assembly Consolidated Resource account Health Commission Wales (Specialist Services) Welsh non-Domestic Rating Summarised Account of local health boards in Wales Summarised Account of NHS trusts in Wales Assembly Members' Pension Scheme Account AGSPBs Arts Council of Wales Care Council for Wales Countryside Council for Wales Health Professions Wales (abolished from 1 April 2006) Higher Education Funding Council for Wales Local Government Boundary Commission for Wales National Council for Education and Training for Wales (abolished from 1 April 2006) National Library of Wales National Library of Wales - Staff Superannuation Scheme Account National Museums and Galleries of Wales Qualifications, Curriculum and Assessment Authority for Wales (abolished from 1 April 2006) Sports Council for Wales Sports Council for Wales Trust Account Wales Centre for Health Wales Tourist Board (abolished from 1 April 2006) Welsh Development Agency (abolished from 1 April 2006) Welsh Language Board NHS trusts Bro Morgannwg Cardiff & Vale Carmarthenshire Ceredigion & Mid Wales Conwy & Denbighshire Gwent Healthcare North East Wales North Glamorgan North West Wales Appendix 1 - Accounts covered by this report Finance 2.qxp 20/06/2007 16:49 Page 26 This is trial version www.adultpdf.com 27Financial Audit of Central Government and NHS Bodies in Wales 2007 Pembrokeshire & Derwen Pontypridd & Rhondda Swansea Velindre Welsh Ambulance Services Local health boards Anglesey Blaenau Gwent Bridgend Caerphilly Cardiff Carmarthenshire Ceredigion Conwy Denbighshire Flintshire Gwynedd Merthyr Tydfil Monmouthshire Neath Port Talbot Newport Pembrokeshire Powys Rhondda Cynon Taf Swansea Torfaen Vale of Glamorgan Wrexham Other bodies Children's Commissioner for Wales Estyn Forestry Commission Wales General Teaching Council for Wales Public Services Ombudsman for Wales Welsh accounts audited by the Comptroller and Auditor General and laid before the National Assembly The Comptroller and Auditor General was responsible for the audit of the following Welsh accounts for 2005/2006: Sports Council and Arts Council Lottery Distribution Accounts The Sports Council for Wales and the Arts Council of Wales are Lottery distributors. Each prepares a separate annual statement of account for the discharge of their Lottery functions. These activities are not devolved responsibilities and are instead performed under delegated authority from the Department of Culture, Media and Sport. The European Agriculture Guidance and Guarantee Fund This European fund pays subsidies to Welsh farmers, which are routed through the National Assembly and the Countryside Council for Wales. This is not a devolved function, and an annual account is prepared by each body in the form prescribed by the European Commission. Finance 2.qxp 20/06/2007 16:49 Page 27 This is trial version www.adultpdf.com Appendix 2 - List of Value for Money reports published in 2005/2006 List of Value for Money reports published in 2005/2006: management of sickness absence in further education institutions in Wales; progress in implementing the Committee's recommendation on the procurement of primary care medicines; the collapse of Antur Dwyryd Llyn; contract for the provision of the out-of-hours GP service in Cardiff; protecting NHS Trust staff from violence and aggression; adult mental health services in Wales: a baseline review of service provision; funding for the National Botanic Garden of Wales; NHS energy management in Wales; administration of Grants for Education Support and Training and the Better Schools Fund; and the Merlin contract - enabling the National Assembly to change its business processes through ICT. Financial Audit of Central Government and NHS Bodies in Wales 200728 Finance 2.qxp 20/06/2007 16:49 Page 28 This is trial version www.adultpdf.com . date and relevant information. Finance 2.qxp 20/06 /2007 16:49 Page 21 This is trial version www.adultpdf.com 22 Financial Audit of Central Government and NHS Bodies in Wales 2007 3.14 As part of. version www.adultpdf.com 26 Financial Audit of Central Government and NHS Bodies in Wales 2007 This Report covers the results of the examination of all of the 2005/2006 accounts prepared by the National Assembly and. Wales Audit Office is making to a Whole of Government Accounts working group of the Public Audit Forum. This forum brings together auditors from across the UK of all bodies involved in auditing