An independent review by Grant Thornton UK LLP on agreed areas of NHS Tayside financial governance arrangements between the financial years 2012/13 – 2017/18

Linked to the wider organisational cultural change programme and focus on leadership, Management should ensure that internal audit play a pivotal role in supporting cultural change, and that their input and recommendations are valued and actioned by Management. Internal audit can support the culture in terms of openness and transparency and continuous improvement if given the profile within NHS Tayside and the strong leadership of the internal audit service.

The SGHSCD should continue to promote an open and transparent culture within the Accountable Officer Group and the Director of Finance group to ensure the continued identification of any early issues and resolution in an upfront way supporting the wider NHS Scotland transformation agenda. SGHSCD could also review the information required in the monthly finance returns to ensure it fully meets their needs and is also easy to follow and understand, in particular tracking movements from month to month

Committee cover papers should only include the author of the paper and the author should be appropriate to the subject matter being considered, and approved by them. It may be helpful to clearly state on the cover paper the assurances the paper and Management are providing to non-executives and on what rationale and how this relates to the strategic objectives of the NHS Board.

There is an opportunity to review the RRL process, in particular the timing of allocations during the year and whether allocations that do arise during the year relating to specific health outcomes/priorities could be notified from the outset of the year as this could give greater clarity to NHS Board’s over the absolute expenditure limit they need to manage to in-year. We note that following the eHealth report SGHSCD have brought allocations forward to a September deadline and plan to improve narrative on allocations. These revised procedures will be reviewed by Scottish Government Internal Audit IN June 2018

In 2013/14 the NHS Tayside Board only received the Finance and Resources Committee minutes, the Annual Financial Statements and an annual report by the Committee chair. Due to timings information the Board did see was often up to three months out of date. Finance reports, which are clear and easy to understand by a non-finance person should be presented on a timely basis to the Board to allow the NHS Board effective insight and scrutiny of the position. The information provided to the NHS Board should be reconcile to the finance position reported to SGHSCD. This will also allow the NHS Board to better link finances, operational performance and workforce matters.

The revised financial reporting adopted going forward is easier to read and understand particularly for those of a non-financial background. Management should continue to review this, focused on clearly articulating the financial performance and reflecting an honest assessment of the associated risks of delivery. The newly constituted finance and Performance Committee will allow finance to be more effectively linked to operational performance.

Where RRL allocations are received in-year, particularly in the latter half of the year, SGHSCD should consider how they would prefer NHS Boards to record this, where expenditure does not occur within the same financial year, in particular how this is reported to the NHS Board but also SGHSCD for monitoring purposes. This could lead to greater clarity in respective NHS Board’s medium term financial plans on the reliance on non-recurring means to achieve financial sustainability.

There is an opportunity for the leadership team at NHS Tayside and the NHS Tayside Board to further set out the culture it expects to be in place and demonstrated across NHS Tayside, including continuing to encouraging open and honest conversations based on the promotion of doing the right thing and the wider NHS in Scotland values

To continue the role out of ownership and accountability for managing budgets to budget holders and supporting them in monitoring the position. In particular, the analysis of the “deferred expenditure” and the NHS Board’s planned actions to clearly commit the associated expenditure in 2018/19 will support the reduction of this balance and it is now more clearly reported and understood.

Currently if an NHS Board is failing to manage expenditure in year to the limit set by SGHSCD (RRL) brokerage is provided. An alternative would be to not provide brokerage, this would result in the NHS Board recording a deficit in the financial statements, and would increase the transparency when reading the accounts of the underlying financial position of the NHS Board, whilst still managing the NHS in Scotland within the budget determined.

The NHS Board should explore what additional training and support is needed to support the Non-Executive Members in their role to ensure effective scrutiny and leadership, including ensuring their voice is heard and acted on by management.

Finance should undertake a review of how in particular it forecasts ahead the likely financial position and how robust this is, and is there a consistent approach so month on month information is comparable and that the Board members can take confidence in the forecasting. Accurate forecasting will ensure sound financial decisions are taken and potential areas of overspending captured earlier in the year.

A more robust recommendation tracker should be introduced for internal audit and external audit recommendations. All recommendations should be captured, progress against the recommendation agreed implementation date reported and action evidenced to close off actions once complete. This will be a key responsibility for the Audit Committee, in particular following up on why recommendations have not been implemented and overseeing their delivery.

There is an opportunity to further review and refresh the internal audit reporting style and overall assurance ratings applied in NHS Tayside to ensure that key messages and prioritisation of action is clear, and the reports are easy to understand and that the more significant messages are not lost in narrative. This will also support the Audit Committee in discharging their role in respect of governance and scrutiny.