Mayday Healthcare NHS Trust  District general hospital for Croydon  600 beds; 130,000 A & E attendances per year  Income £155M; 2800 WTEs  Croydon PCT by far biggest Commissioner  06 – 07: small surplus; 05 – 06 £6M deficit  Audit Committee (AC) meets 4 or 5 times a year

I’m going to talk about  AC in the Mayday Governance structure  Ways of working: issues, experience, challenges

Mayday Governance Structure Trust Board ↓ Board Committees Board Committees AuditPeople and Organisation Development Remuneration Equality and Diversity Strategy Charitable Funds Governance ↓ Clinical Governance Clinical Governance Environmental Governance Environmental Governance Information Governance Information Governance All above Committees chaired by Non Execs, except Clinical, Environmental and Information Governance Committees which are chaired by Execs

Tasks of the Mayday Audit Committee  Way in which Board ensures effective internal controls are in place  Provides an independent check on and challenge to the Executive and sometimes to the Board  Is not an executive body

……more specifically, tasks cover  Governance, Risk Management, Internal Control  Internal Audit  External Audit  Other significant assurance functions  Financial Reporting  Management’s risk management and internal control policies / practices / performance ……. I’ll look at Mayday AC using these headings

Governance, Risk Management, Internal Controls  Check that appropriate systems in place and properly operated / maintained  Use Assurance Framework to guide work  Challenges: –Not AC’s job to itself take part in risk management –Sometimes hard for NEDs to put on “independent hat” –Includes Clinical Governance: not easy, how to do this? –Making sure risk information processes focus on future / emerging risks as well as the present

Ensure Effective Internal Audit (IA) in Place  Challenges: –Ensuring we draw common threads from IA reporting: indicators of systemic problems –Process for implementing, monitoring, following up actions on IA recommendations is executive responsibility, not AC’s –AC needs to ensure effective executive process in place, and to resist temptation to “do the job itself”

Review Work and Findings of External Auditors (EA)  Challenges: –EA not appointed by us! (Mayday’s EA is Audit Commission) –Similar to IA re monitoring, follow up of actions from ALE, management letter, etc –Not easy to systematically review EA’s performance: this year, used completed Audit Commission QRP (quality review process) questionnaire as basis for discussion with EA

Words of Wisdom from Warren Buffet (2002 annual letter to Berkshire Hathaway shareholders) Four fundamental questions for Audit Committees in relation to EA:  If the EA was solely responsible for preparation of the company’s financial statements, would the statements have been prepared any differently from the manner selected by management?  If the EA was an investor, would he have received the information essential to a proper understanding of the company’s financial performance?  Is the company following the same internal audit procedure that would be followed if the EA was CEO? If not, what are the differences and why?  Is the EA aware of any actions (accounting or operational) that have the purpose and effect of moving revenue or expenses from one reporting period to another?

Review Work and Findings of Other Significant Assurance Functions  Challenge: There’s a large volume of possible material - eg Healthcare Commission, Royal Colleges, CNST, Clinical Governance Committee. Mayday AC not systematic enough in addressing this material, needs to improve.

Financial Reporting  Annual Financial Statements  Reporting to Board, including budgetary control and forecasting  Challenges: Is reporting fit for purpose? How far should AC push executive / Board to adopt particular types of reporting? An area where the boundary between Exec and Non- Exec activity needs care

Management: are their risk management and internal control practices and performance satisfactory?  This is a key area, but with some hard–to-manage boundaries  Need to monitor - and require - “right tone from the top”: means executive operational policies and practices are consistent with proper internal control and risk management  Experience at Mayday: current executive management does set the right tone, greatly assists work of AC

Managing AC’s Performance  Use list of self assessment questions after every meeting (see next slide)  Periodically use AC Handbook’s checklist

Mayday Audit Committee Self Assessment Questions  Did the right agenda items come to the Committee?  Was the appropriate amount of time given to each agenda item?  Did the right papers come to the Committee?  Were the papers for the Committee clear, with the appropriate level of detail?  Were the papers issued to members in a timely manner?  Did we concentrate on the right issues - policy and important other matters that are truly the Audit Committee’s responsibility, rather than matters of detail or issues that should be dealt with elsewhere (for example by management or by another committee)?  Did we work together satisfactorily as a team?