Agenda item

The Acting Director of Finance and Procurement submits a report that summarises the key issues identified in the Trust’s 2007/08 Annual Audit Letter.

Malcolm Lowe-Lauri, Chief Executive Officer, University Hospitals of Leicester, NHS Trust and Helen Seth, Acting Director of Strategy University Hospitals of Leicester, NHS Trust were in attendance to present the Annual Audit letter 2007/08 and its fit with capital development plans.

Malcolm also reported back on the results from the Annual Health Check 2007/2008. In the quality of service to patients category the UHL Trust had maintained an excellent record, which it had now received for 3 years running.  The trust had been compliant and met all 43 core standards. They had met 10 out of 11 national targets with the one not met being Revascularisation. Malcolm explained that there had been a fire in one of the theatres and there had been capacity constraints in the Intensive Treatment Unit. However the issues had now been resolved. Malcolm also explained that 9 out of the 10 new national targets had been achieved with the exception being the referral to treatment time target.

The Committee was also informed that the score for the use of resources category had dropped from good to fair primarily due to a reduction in the Auditor’s Local Evaluation (ALE) score in the Financial reporting, Internal control and Value for money categories which had dropped from 3 to 2.

Malcolm explained the recommendations and actions from the Auditors Local Evaluation 2007/08. The auditors had identified some weaknesses in the assurance framework and they needed more evidence. They suggested that the risk management processes be strengthened. The communication and procurement strategies were not up to date and it was recommended that these be kept up to date and the progress of both be regularly reported on. The auditors were not clear that benchmarking and reference cost information was being used to improve cost efficiency. There was also a recommendation that the clinical and service strategy be finalised and the medium term financial strategy be revised.  

In terms of action being taken, Malcolm explained that there was a detailed action plan as part of ‘Getting into Strategy’ that had been endorsed by the Trust executive on 26 October 2008. The idea of the plan was to make sure the Trust was fit for purpose. There would be reporting of the progress report of the action plan to the Trust Board meeting in December.

There was a recommendation from the auditors that International Financial Reporting Standards (IFRS) accounting requirements be adopted by the NHS. Malcolm commented that there was already an action to ensure this would happen. A full review of the implication of IFRS had been undertaken with an associated action plan completed for the Department of Health conversion timetable. The next meeting with the Department of Health to discuss the development of capital investment plans was taking place on Thursday 27 November 2008. The plan was to prepare for a comprehensive engagement and consultation process to inform the development of strategic capital investment plans.

 It was also stated that there should be full disclosure of salary information. Malcolm commented that the plan was that all future senior management appointments would be fully disclosed. The auditors stated that the Trust should apply the lessons learnt from the Private Finance Initiative (PFI) in developing its future estates strategy. Malcolm commented that the modular approach was being taken to develop and deliver the future clinical and estates strategy.

There was a recommendation that the Trust should develop an action plan to address the issues resulting in the Auditor’s Local Evaluation score of 2. Malcolm stated that an action plan had been submitted to the Trust Executive and the milestones of the plan were now currently being worked through. The target was to achieve a score of 4 with 3 being at least the minimum score the Trust wanted to achieve.  Malcolm commented that the Health Service struggled to know about its costs. The Trust would now be introducing Service Line reporting to arrange costs and income. The Auditors had been surprised there the development of the system had not been further down the line.

Malcolm also wanted to inform the Committee that there would be a project entitled ‘Getting into Strategy’ which would look at the future of hospitals. This would form part two of the ‘Getting into Shape’ project. There would also be further discussions held with the Department of Health, which would be looking at organising the Emergency Services. 

The Chair commented that the Committee was very disappointed that the auditors had marked the Trust down to 2 and raising the mark to 4 would be quite a step. He queried what was the major factor for the mark being reduced. Malcolm commented that previously there had been a lot of time spent on the Pathways project up to July 2007 last year and other areas had not received as much attention as they should have. The Trust was now playing catch up in all those areas. The Chair queried whether the failing of the Pathways project was due to the lack of adequate financial structures in place.  Malcolm commented that the issue was that the requirements of the project were not affordable to repay the forecast £900 million mortgage.

A Member requested to see a copy of the Auditor’s Local Evaluation action plan that had been submitted to the Trust executive in October. Malcolm agreed to make the document available.

The Vice Chair offered his congratulations that the Trust had received an excellent rating for 3 years in a row for the quality of service that it provided to patients. However he raised concerns about the business side of the Trust and emphasised that the Auditors Local Evaluation (ALE) needed to be developed and he stated his disappointment that it was not before the Committee today and said it was difficult to scrutinise if the relevant information was not there. He raised the following queries, would any staff be replaced, would it affect the allocation of £70 million from the Department of Health and would there be any changes to the non executive members of the Trust. He stated his disappointed with the report that had been submitted to the Committee.

Malcolm commented that there was currently a vacancy of Finance Director and there was an acting appointment presently. With regard to the rest of the staff Malcolm stated that he felt they did not need replacing as they were good staff however it was important to get them focused. He mentioned that the Trust could have appealed with the Auditors  to keep their mark at 3 however the Trust needed to move forward. In the context of the £70m reference Malcolm stated that that any money that the Trust would receive from the Government would either be as an equity or interest baring debt. If it was an equity the Trust would have to pay it back in infinite charges and if it was debt then they would pay the interest on the debt. The Vice Chair commented that this was not the case with all the money that came from the Department of Health as it would be difficult to work if the money had to be paid each time. He queried whether the money for the ‘Deep Clean’ project had to be paid back as well. Malcolm commented that he was referring to Capital and the money for Deep Clean was revenue that they did not have to pay back. With regard to the meetings Malcolm commented that the reason for the ‘Getting into Shape’ initiative was because that the Trust Board were spending monthly meetings considering large amounts of operational detail. The non-executives were fully committed with the dismantling and putting together of the Trust Board. Malcolm added that he had full confidence in his non-executive colleagues and chairman.

Malcolm commented that the Treasury were not in favour of the International Financial Reporting Standards (IFRS) accounting standards however last year they had finally been accepted.

In response to a question Malcolm informed the Committee that line management arrangements were clear as he appointed new personnel and with existing colleagues he was sure there would be no problems with disclosure. 

A Member of the Committee raised concern that the individuals that needed to be scrutinised had now left the Primary Care Trust and it was up to people who had replaced them to manage as best as they could. It was commented that what happened with regard to Pathways was appalling and it was still difficult to get answers. He queried what was the cost of the project as a whole, who had been held accountable and what could be said to the public in Leicester to explain the situation. Malcolm commented that the project would have cost around £900 million. The salary of the chief executive was £173,000. He stated that he was worried that he would be talking down Leicester Health’s services if he continued with discussion on the Pathways project.

The Chair concluded that the Committee were very disappointed with the LE results and would want the Trust to bounce back. He thanked Malcolm for the presentation.

RESOLVED:

1)     that Malcolm make the Auditor’s Local Evaluation action plan

available to Members