Southend University Hospital NHS Foundation Trust

Year ending 31 March 2013

Letter to Governors

8 July 2013

Ernst & Young i

The Governors Southend University Hospital NHS Foundation Trust Prittlewell Chase Westcliff-on-sea Essex SS0 0RY

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.1.2 8 July 2013

Dear Governors,

Letter to Governors 2012/13

The purpose of this Letter to Governors is to communicate to you key issues from our 2012/13 work.

We have already reported the detailed findings from our audit work to the Audit Committee, those charged with governance. These were detailed in our 2012-13 Audit Results Report issued on 22 May 2013. We will not repeat those detailed findings in this letter but instead provide a summary of our key findings.

I would like to take this opportunity to thank the employees of Southend University Hospital NHS

Foundation Trust for their assistance during the course of our work.

Yours sincerely

Debbie Hanson For and behalf of Ernst & Young LLP Enc

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Contents

1. Introduction ..................................................................................................................... 2

2. Key findings ..................................................................................................................... 4

The contents of this report are subject to the terms and conditions of our appointment as set out in our engagement letter.

This report is made solely to the Audit Committee, Board of Directors and management of Southend University Hospital NHS Foundation Trust in accordance with our engagement letter. Our work has been undertaken so that we might state to the Audit Committee, Board of Directors and management of the Trust those matters we are required to state to them in this report and for no other purpose. To the fullest extent permitted by law we do not accept or assume responsibility to anyone other than the Audit Committee, Board of Directors and management of the Trust for this report or for the opinions we have formed. It should not be provided to any third-party without our prior written consent.

Introduction

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1. Introduction

1.1 Responsibilities

Our 2012/13 audit work has been undertaken in accordance with the Audit Plan that we issued on 22 January 2013 and is conducted in accordance with Monitor’s Audit Code, International Standards on Auditing (UK and Ireland) and other guidance issued by Monitor.

The Trust was responsible for preparing and publishing the statement of accounts, annual report and annual governance statement. The Trust was also responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources. As auditors we are responsible for:

► forming an opinion on your financial statements;

► forming a conclusion on the arrangements that the Trust has in place to secure economy, efficiency and effectiveness in its use of resources; and

► reviewing, and reporting on as appropriate, other information published with the financial statements, including the annual governance statement, the annual report and the remuneration report.

Summarised below are the conclusions from all elements of our work:

1.2 Summary of results

We summarise the results of our work as follows:

What the audit covers What we reported

Audit of the 2012/13 annual accounts and opinions on:

► The financial statements

► That part of the remuneration report to be audited

► The information given in the annual report for the financial year for which the financial statements are prepared, confirming it is consistent with the financial statements.

Unqualified audit opinions on the financial statements on 29 May.

We also concluded that the remuneration report has been prepared properly and the information in the annual report is consistent with the financial statements.

Examination of the financial monitoring and accounts (FTCs) sent to Monitor and reporting differences (over £250,000) from the audited financial statements.

No differences to report

Unqualified report on the FTCs issued on 29 May

Examining the contents of the Trust’s Quality Report and testing of three indicators for accuracy.

Issuing a Limited Assurance Report and reporting any matters to the Governors.

Unqualified Limited Assurance Report issued on 29 May.

Report to Govenors presented to the Audit Committee and issued to the Governors in June.

Introduction

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Forming a conclusion on the adequacy of the Trust’s arrangements for securing economy, efficiency and effectiveness in its use of resources.

No matters to report

Unqualified value for money conclusion issued on 29 May.

Issuing a report to those charged with governance of the Trust (the Audit Committee) communicating significant findings resulting from our audit.

Audit Results Report issued on 22 May.

Considering whether, in the public interest, we should make a report on any matter coming to our attention in the course of the audit.

No issues to report.

Determining whether any other action should be taken in relation to our responsibilities under the Audit Commission Act, including whether a referral to the Secretary of State should be made.

No issues to report.

Issuing a certificate that we have completed the audit in accordance with the requirements of Chapter 5 of Part 2 of the National Health Service Act 2006 and the Audit Code for NHS Foundation Trusts issued by Monitor.

Audit completion certificate issued on 29 May.

Key findings

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2. Key findings

2.1 Financial statement audit

We audited the Trust’s Statement of Accounts in line with Monitor’s Audit Code, International Standards on Auditing (UK and Ireland) and other guidance issued by Monitor. The underlying quality of the process for producing the accounts, including the supporting working papers was good.

2.1.1 Control themes and observations

As part of our audit of the financial statements, we obtained an understanding of internal control sufficient to plan our audit and determine the nature, timing and extent of testing performed. Although our audit was not designed to express an opinion on the effectiveness of internal of internal control we communicated to those charged with governance the following weakness we identified.

Description Impact

The fixed asset register does not produce reliable information regarding revaluations and impairments.

Where upward revaluations occur that can be offset against previous year’s losses, this needs to be calculated manually using spreadsheets as the fixed asset register does not hold this information. This increases the risk of information being lost over time and errors being made.

The total revaluation reserve balance included in the fixed asset register was significantly different from that reported in the Agresso general ledger system (£8 million in the fixed asset register compared to £28 million in Agresso). The amounts for individual assets were correct but when the amounts are aggregated the fixed asset register produced an incorrect figure.

The revaluation reserve balance needs to be taken from the general ledger system rather than the fixed asset register. The two systems however should agree.

Several manual adjustments were required to the fixed asset register to produce information for the accounts. The result was that Note 8 in the accounts did not directly link to the summary of the fixed asset register.

For audit purposes, we were able to confirm that the figures in Note 8 were correct. However, the need for manual adjustments increased the likelihood of error in the production of the accounts.

2.2 Value for money conclusion

Monitor’s Audit Code sets out our responsibility to satisfy ourselves that the Trust has put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources.

We considered the impact on the Trust of Enterprise Medical Limited (EML) going onto administration. Our review concluded that the adverse impact upon the Trust’s finances was not material and that, whilst this is a signficant issue for the Trust, it is not of sufficient scope or impact to adversly affect our value for money conclusion.

We issued an unqualified valaue for money conclusion on 29 May.

2.3 The quality report

Our 2012/13 review of the Trust’s quality report and audit of the mandated indicators found that its content was in line with Monitors requirements and consistent with other information published by the Trust.

Key findings

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Our testing found that the systems used to produce data for the mandated indicators were sound and that the indicators were fairly stated.

We issued an unqualified Limited Assurance Report to the Trust on the 29 May and presented our detailed findings in a separate report to Governors.

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