NHS Education for Scotland

NES Item 7b June 2016 NES/16/40 (Enclosure) NHS Education for Scotland Board Paper Summary: Audit Committee Minutes 1. Title of Paper Minutes of Audit Committee meeting held on 09 June 2016: copy attached. 2. Author(s) of Paper Jennifer Allison, Committee Administrator 3. Purpose of Paper To receive the minutes of the Audit Committee meeting held on 09 June 2016. 4. Items for Noting a) Item 8 Annual Reports of Governance Committees of the Board The committee received and noted the 2015/16 annual reports from the following: i. Staff Governance Committee (including the Remuneration Committee) ii. Educational and Research Governance Committee iii. Finance and Performance Management Committee b) Item 9 Internal Audit Reports The committee received the following internal audit reports: i. Property Transaction Monitoring This report reviewed NES s arrangements for the recording and monitoring of property transactions during 2015/16 in line with the NHS Scotland Property Transactions Handbook. The committee noted that NES has undertaken no property transactions during the 2015/16 financial year. ii. Fraud Prevention Arrangements This report reviewed proposed changes to finance processes developed as part of the finance transformation project, to confirm that the design of the proposed controls was appropriate. The committee noted the report and were satisfied with the recommendations and the management responses. 1

iii. Internal Audit Annual Report for 2015/16 The committee received and noted this positive report in which the internal auditors confirm that NES has a framework of controls in place that provides reasonable assurance regarding the effective and efficient achievement of the organisation s objectives and the management of key risks. iv. Progress Report This quarterly report summaries internal audit activity since the committee s last meeting in April 2016 and confirms that overall performance against KPIs has been very good. The committee noted the report and the proposed internal audit plan for the next quarter. v. Internal Audit Follow-Up (Q1 2015/16) This quarterly report provides assurance that internal audit actions have been implemented satisfactorily. The committee noted the report and a verbal update from the internal auditors regarding the current status of outstanding management actions. c) Item 10 2014/15 Annual Accounts The committee received the following reports regarding the Annual Report and Accounts for the year ended 31 March 2016. i. External Audit Report on 2015/16 Accounts The committee received the external auditor s report on the 2015/16 accounts and confirmed they were content for the report and Letter of Representation to be submitted for review and signature at the Board meeting on 23 June 2016. The committee noted that the external auditors expected to issue an unmodified opinion and no material issues or audit adjustments had been identified. The external auditors confirmed NES s financial reporting control environment remains robust and there were no material control matters to draw to the committee s attention. ii. Annual Report from Audit Committee and Governance Statement The committee reviewed and noted the 2015/16 Annual Report of the Audit Committee and the Governance Statement. The committee confirmed they were satisfied with the annual report and the Governance Statement and subject to the inclusion of the 2016/17 work plan, approved their submission to the Board meeting on 23 June 2016. iii. Annual Report and Accounts for year ended 31 March 2016 The committee received the 2015/16 Annual Report and Accounts. The committee confirmed they were satisfied with the 2015/16 Annual Report and Accounts and subject to final minor amendments, approved their submission to the Board meeting on 23 June 2016. iv. Notification from Sponsored Body Audit Committees The committee noted and approved the response to the request for notification from sponsored body audit committees. The Chair will complete the formal signoff at the Board meeting on 23 June 2016. 2

d) Other External Reports Audrey McColl explained that the external reports provided are service audits which relate either to business activity which NES outsources (Payroll) or to national systems used. As NES is not responsible for managing these systems, these audits provide assurance that the design, implementation and maintenance of controls relating to these systems are effective. The committee noted four reports and the unqualified Independent Service Auditor opinion. e) Item 12 Annual Report to Counter Fraud Services 2015/16 Janice Sinclair presented the report which details performance against a set of measurable tasks and a report on the level of engagement with counter fraud activities throughout 2015/16. The committee noted the report and approved its submission to Counter Fraud Services. f) Item 13 - Counter Fraud Report Update Janice Sinclair presented the report regarding actions being taken to ensure that NES supports the Scottish Government strategy to combat financial crime in NHS Scotland. The committee noted the report and progress of the NES referrals to CFS. g) Item 14 Feedback, Comments, Concerns and Complaints 2014/15 Annual Report The committee received and noted this annual report which is published in accordance with the Patient Rights (Scotland) Directions 2012 and national complaints guidance. The committee noted the small number of complaints received by NES and the positive work that has been completed in relation to lessons learned and implementing improvements. 5. Recommendations a) Item 10 2015/16 Annual Accounts i. External Audit Report on 2015/16 Accounts and Letter of Representation To recommend this report for consideration by the Board on 23 June 2016 and to recommend the Letter of Representation for signature by the Accountable Officer on behalf of the Board. ii. Annual Report from Audit Committee and Governance Statement To recommend the Governance Statement to the Accountable Officer and the Board. iii. Annual Report and Accounts for year ended 31 March 2016 To be submitted to the Board on 23 June 2016 and to recommend these to the Board for approval. NES June 2016 3

Unconfirmed IN CONFIDENCE NES/AUD/16/27 AUDIT COMMITTEE Minutes of the Fifty-Eighth meeting of the Audit Committee held on Thursday 09 June 2016 at Westport 102, Edinburgh, Room 8. Present: In attendance: Carole Wilkinson (Chair) Doreen Steele (via telephone) Susan Stewart Susan Douglas-Scott (via telephone) Audrey McColl, Director of Finance Caroline Lamb, Chief Executive Janice Sinclair, Acting Deputy Director of Finance Monica Halcro, Governance and Operational Manager, Finance Donald Cameron, Associate Director of Planning and Corporate Governance (acting) Helen Berry, Scott-Moncrieff Chris Brown, Scott-Moncrief Lauren Hedley, Deloitte James Boyle, Deloitte David Ferguson, Board Services Manager Jenn Allison, Committee Administrator 1. Welcome and introductions The Chair welcomed everyone to the meeting, particularly Janice Sinclair and Monica Halcro who were attending to present the annual accounts, Lauren Hedley and James Boyle from Deloitte and Chris Brown and Helen Berry from Scott- Moncrieff. Helen Berry was congratulated on her recent promotion and it was noted that this will be the last meeting attended by representatives from Deloitte, whose contract as external auditors to NES will end on 30 June 2016. 2. Apologies for absence Apologies were received from NES Board Chair Lindsay Burley and Deloitte representative Kirsty Stanners. Doreen Steele had to leave the meeting early but was present for items up to and including item 13. 3. Declarations of interest There were no declarations of interest in relation to items on the agenda.

4. Any other business There was no other business requiring consideration by the committee. 5. Minutes of the Audit Committee, 14 April 2016 (NES/AUD/16/19) The minutes of the Audit Committee 14 April 2016 were approved as a correct record. Action: JA 6. Action list of the Audit Committee, 14 April 2016 (NES/AUD/16/20) Members noted that the actions from the previous meeting were completed or in hand. The following points were raised: Item 8e: Audrey McColl noted that workshops had been held with senior managers regarding the role of the Audit Committee and that this would be revisited in the planned session on audit recommendations. Induction for Audit Committee members: this will be conducted on an individual basis. It was noted that Grant Thornton have been appointed as the new External Auditors, with effect from 1 st July 2016. 7. Matters arising a) Review of Committee Remits In response to a point raised by the E&RGC, members discussed the frequency with which Board Committees should review their remits. It was agreed that remits should be reviewed on an annual basis as part of the annual reporting process. The current annual report guidance will be updated, requesting committees to confirm, on an annual basis, whether or not there should be any substantive changes to their remits. Action: AMcC 8. Annual Reports of Governance Committees of the Board The Chair introduced the annual reports, which are intended to provide the Audit Committee with evidence of how each committee has effectively discharged its remit and responsibilities during the period of 1 April 2015 to 31 March 2016. The committee were invited to comment.

a) Staff Governance and Remuneration Committees The work of the Staff Governance Committee has ensured NES meets or exceeds and continually improves performance against the requirements of the Staff Governance Standard. The work of the Remuneration Committee has ensured probity and highly effective governance of remuneration and performance in line with NES s requirements. The Remuneration Committee works as a sub-committee of the Staff Governance Committee, which is the structure across all NHS Boards. Susan Douglas-Scott commented that the committee had been ably supported by the Lead Officers. The Audit committee noted and were satisfied with this report. b) Educational and Research Governance Committee (E&RGC) The work of the E&RGC has ensured the effective management and improvement of the quality of NES s education and research activities and quality and compliance with NES s statutory duties for person-centred care, participation and equality & diversity. Members noted that the Scottish Government are currently revising the terms of reference for a range of agencies (including the Scottish Funding Council), as well as developing agendas to help widen access to higher education including the creation of an additional 50 undergraduate medical places. It was agreed that NES should take the opportunity to contribute to the SFC review and that it would be useful to draw these developments to the attention of the E&RGC. Action: AMcC The committee noted and were satisfied with this report, commenting that it was comprehensive and concise. c) Finance and Performance Management Committee The work of the Finance and Performance Management Committee has ensured effective management and scrutiny of financial and performance related reports and proposals and for reporting and providing recommendations to the Board. The committee noted and were satisfied with this report, commenting that it was comprehensive and concise. As a general point, the committee remained content with the current format of the committees annual reports.

9. Internal Audit Reports a) Property Transaction Monitoring Helen Berry introduced the report, which reviewed NES s arrangements for the recording and monitoring of property transactions during the 2015/16 financial year in line with the NHS Scotland Property Transactions Handbook. The committee noted that NES has undertaken no property transactions during this period. b) Fraud Prevention Arrangements Helen Berry introduced the report, which reviewed proposed changes to finance processes developed as part of the finance transformation project, to confirm that the design of the proposed controls was appropriate. The report found that controls set out in the documented finance processes are adequately designed. However, three recommendations were made in relation to documentation, process owners and review of systems access rights which would enable further improvement. The committee noted the report and were satisfied with the recommendations and the management responses. c) Internal Audit Annual Report 2015/16 Chris Brown introduced the report, which summarises internal audit key findings during the 2015/16 financial year. It was noted that the Healthcare Science audit had been deferred to 2016/17 and that the Corporate Systems Management report is highlighted as being in draft as the key findings have been agreed but not the detailed recommendations and management responses. It was confirmed that all audits had been completed in compliance with Public Sector Internal Audit Standards. The report provided a clean annual assurance statement. This supports the organisation-wide Governance Statement. The committee noted the report. d) Progress Report Q1 2016/17 Helen Berry introduced the report, which summaries internal audit activity since the committee s last meeting in April 2016 and confirms the reviews planned for the second quarter. Overall performance against KPIs has been very good and although three of the KPIs were red against a target of 100%, the average achieved in each was satisfactory. The committee noted the report and approved the proposed internal audit plan for the next quarter.

e) Follow-up of Audit Recommendations Helen Berry introduced the report, which provides senior management and the Audit Committee with assurance that agreed internal audit recommendation have been implemented satisfactorily. She noted that actions are being closed more quickly since quarterly reporting had been implemented a year ago and the committee also noted that more realistic timescales are being set. The committee noted the report and were satisfied that NES continues to make good progress in implementing outstanding actions. 10. 2015/16 Annual Accounts a) External Audit Report 2015/16 Accounts and Letter of representation (Deloitte) Jim Boyle introduced the External Audit Report on the 2015/16 Accounts. He confirmed that the audit was substantially complete and noted their satisfaction that disclosures are appropriate and in line with requirements, with no disclosure deficiencies noted. He noted that they are comfortable with the work going on in NES relating to governance, monitoring and management decisions and thanked Audrey McColl and the Finance team for their support during the period of their term of office as external auditors to NES. It was envisaged that an unmodified audit opinion would be issued on final completion of the audit. A hand over between Deloitte and the new external auditors, Grant Thornton, will take place in the near future. In discussion, members suggested that it may be useful to elaborate on the note at the foot of page 22 of the report. The committee noted the report and thanked Deloitte for their work and complimented both Deloitte and Scott-Moncrief on the accessible layout and wording of their reports. The committee were therefore content for the external audit report to be submitted to the Board meeting on 23 June 2016. The Letter of Representation will also be prepared for signature at this Board meeting. Action: AMcC

b) Annual Report from Audit Committee and (NES/AUD/16/22) Governance Statement Audrey McColl introduced the report, which summarises how the committee has discharged its remit and the responsibilities delegated to it by the Board during 2015/16, for comment and approval prior to submission to the Board. Audrey explained that the table on page 8 will be updated to reflect items which had not been finalised when this draft report was issued. It was also highlighted that the report included an appendix which reflects how NES activities reflect Best Value characteristics. The committee noted that the annual report was both comprehensive and clear and approved its submission to the Board. Action: AMcC c) Annual Report and Accounts for year-end (NES/AUD/16/23) 31 March 2016 Janice Sinclair introduced the paper, which presented the draft annual accounts for the financial year 2015/16. She highlighted a number of presentational changes and some new disclosure requirements which have impacted on the preparation of the annual accounts. The table required for Staff Numbers was tabled for inclusion in the report. The committee noted the report and congratulated the finance team on their hard work in compiling the annual accounts, particularly against a background of significant staff changes. Members considered that, the new reporting requirements arising from changes to accounting standards, had not made the annual accounts more accessible. The committee confirmed that they were satisfied with the 2015-16 Annual Report and Accounts and, subject to minor amendments to be agreed with External Audit, recommended them to the Board for approval at the meeting on 23 rd June 2016. Action: JS d) Notification from Sponsored Body Audit (NES/AUD/16/24) Committees Audrey McColl introduced the paper, which presented the proposed response to the annual request from the Health Finance Directorate of Scottish Government for details of any significant issues of fraud which arose during 2015/16. The committee noted that no significant issues or fraud had been identified and approved the response. The formal sign-off of the letter will take place at the Board meeting on 23 June 2016. Action: AMcC

11. Other External Reports Audrey McColl explained that the external reports provided are service audits which relate either to business activity which NES outsources (Payroll) or to national systems used. As NES is not responsible for managing these systems, these audits provide assurance that the design, implementation and maintenance of controls relating to these systems are effective. a) NSS Payroll Services Service Audit Report 2015/16 This report relates to the payroll system used by NHS National Services Scotland (NSS) to process the NES payroll. Audrey McColl confirmed that this report will be discussed at the next service review. The committee noted the report and the unqualified Independent Service Auditor opinion in section 2. b) NSS Practitioner Services Audit Report 2015/16 This report relates to the control environment of NSS Practitioner Services (PS) for the payment of family health service practitioners. It was pointed out that NES does not use all of the services covered by the report although payments to Dental practices are processes on behalf of NES. The committee noted the report and the unqualified Independent Service Auditor opinion in section 2. c) NSS National IT Contract 2015/16 This report describes the control environment in operation within Atos and its alliance partners, IBM and Sopra Group (referred to as Atos ) relating to the delivery of the NHSScotland National Information Technology Services Contract. As Scott Moncrieff carry out this audit, Helen Berry explained that NSS and Atos are joint providers of IT services and that there have been marked improvements over the last few years. In a wider discussion, it was noted that as part of the audit process it would be useful to focus on any planned upgrades and/or replacements of systems. Helen Berry noted that as part of the IT contract a letter is sent to the Director of Finance in each NHS Board each year, requesting feedback which is then reviewed by NSS and Atos. Helen confirmed that it would still be possible for NES to submit a response to the most recent request. The committee noted the report and the unqualified Independent Service Auditor opinion in section 2.

d) NHS Ayrshire Arran NSI Financial Ledger Services Report 2015-16 Audrey McColl presented the report, which sets out the overarching control objectives in place for the year 1 April 2015 to 31 March 2016 for the Financial Ledger service hosted by NHS Ayrshire and Arran. The system was used by all NHS Boards in Scotland during 2015/16 to process core financial transactions. NHS A&A also provide a helpdesk service. The committee noted the report and the unqualified Independent Service Auditor opinion in section 2. However, the committee also observed that the format of the report was not as accessible as the other service audit reports provided and it was agreed that this feedback would be forwarded to the National Finance Systems Management Group. 12. Annual Report to Counter Fraud Services (2015/16) (NES/AUD/16/25) Janice Sinclair presented the draft annual report which details performance against a set of measurable tasks in the form of a completed checklist and a report on the level of engagement with counter fraud activities throughout 2015/16. Janice noted that around half of line managers in NES have attended the counter fraud workshop and 78% of staff have completed the mandatory training. It was considered that further work could be done to promote fraud awareness amongst line managers, including further promotion of the tool kit and of the training available. The committee noted the report and approved its submission to Counter Fraud Services. Action: JS 13. Strategy to Combat Financial Crime in NHS Scotland (NES/AUD/16/26) Update Janice Sinclair presented the report, which provided an update in relation to activities underway in NES, during 2015/16, aimed at supporting the Strategy to Combat Financial Crime in NHS Scotland. Janice explained that any cases reported to CFS during 2015/16 are either closed or are being dealt with. Plans in relation to NES actions for the financial year 2016/17 are in hand. The committee noted the report and progress of the NES referrals to CFS.

14. Feedback, Comments, Concerns and Complaints (NES/AUD/16/27) Annual Report for 2015/16 Donald Cameron presented the report, which uses a standard template from the Scottish Health Council and focuses on demonstrating how NES has used complaints and feedback to implement and evaluate improvements to programmes and services. This includes spreading good practice, encouraging front line resolution and providing positive feedback regarding the reporting. Eleven complaints were reported last year and all were responded to and resolved within the recommended timescales. In discussion, members welcomed the case study approach used within the report. The committee noted and was satisfied with the report. 15. Items for information The following Audit Scotland Report was noted by the committee: a) Reshaping care for older people Impact report 16. Private meeting Prior to the private meeting between the Auditors and the Audit Committee members, the Chair thanked; - Jennifer Allison and David Ferguson for their work in supporting the committee; - The finance team for their work in compiling the Annual Accounts and; - The representatives from Deloitte for their services to NES during their appointment as external auditors. 17. Date and time of next meeting The next meeting of the Audit Committee will be held on Thursday 06 October at 10:45am in Westport Room 8. NES June 2016 JA/df/am