Feature / Case for collaboration?

Click here to download a PDF version

NHS organisations are struggling to meet increasing demand from flat real-terms funding settlements. Care scandals have also highlighted the need for effective governance over quality and safety. In this context, it is vital that boards/governing bodies (supported by their audit committees) can demonstrate that they have a firm grip over every dimension of their organisation’s business. Audit and assurance arrangements are key to managing financial and quality risks – and can help avoid any gaps (or overlaps) in oversight.

NHS audit committees are responsible for ensuring that a robust assurance framework exists over all types of risk. These include financial, operational, clinical or quality-related risks, as the HFMA’s NHS audit committee handbook makes clear. ‘The committee shall review the establishment and maintenance of an effective system of integrated governance, risk management and internal control, across the whole of the organisation’s activities (clinical and non-clinical),’ it says in example model terms of reference.

This can be achieved in many different ways. With a wide range of healthcare bodies (in terms of size and scope), there is unlikely to ever be a perfect ‘one size fits all’ solution However, given the range of issues involved, expecting an audit committee to directly scrutinise and gain meaningful assurance over all areas of activity is increasingly unrealistic (other than in the smallest of organisations) and can result in very lengthy, unwieldy and ineffective meetings. Instead, while recognising the audit committee cannot abrogate its ultimate responsibility, some organisations have responded to this pressure by establishing links with non-executive director (NED)-led subcommittees that have a scrutiny or monitoring remit. Examples include subcommittees to oversee:

•  Quality and safety
•  Risk
•  Finance and investment.

Where a committee is established with a scrutiny remit, it can support the audit committee in commissioning, receiving and responding to assurances. In some instances, these committees will also have a wider decision-making role – for example, a finance and investment committee may have responsibility for approving capital investment proposals.

The possible need for additional scrutiny committees to support the audit committee was borne out by a survey conducted by specialist assurance provider TIAA early in 2014 (with the support of the HFMA Governance and Audit Committee). The survey revealed that only half of the NHS audit committees in the sample provided independent scrutiny themselves over clinical governance. And fewer than half had standing agenda items on safeguarding, clinical audit, complaints, regulatory compliance or patient safety.

On financial governance, the survey also indicated that only a minority of audit committees regularly considered any financial reports other than the annual accounts, and fewer than half regularly considered matters relating to either human resources or legal issues.

The NHS audit committee handbook acknowledges that collaboration between committees can take place, but emphasises that the audit committee itself remains ultimately responsible for evaluating governance, risk and control. This means that relationships between committees must be crystal clear (see box, left).

Quality and safety committees seem to be the most advanced in providing support to audit committees. For example, Barts Health
NHS Trust, the UK’s largest trust, has established a NED-led quality assurance committee that commissions work from internal audit and other assurance sources and reports back formally to the audit committee. However, the audit committee maintains its ultimate responsibility for assessing governance, risk and control and signs off
the overall internal audit plan. There is also strong NED cross-membership between the two committees. These arrangements
reduce the audit committee’s own workload and allocate greater resources to assurance duties.

Although it is less common, this approach would also work for risk and finance and investment committees. At present, the tendency here is to focus on cross-membership rather than commissioning and reviewing assurances relating to financial risks and risk management.

Whether or not an organisation establishes other committees to support the audit committee in discharging its responsibility for oversight, scrutiny and assurance of different types of risk is a decision for the board/governing body. There are a number of issues that need to be thought through (see box, right).

If additional scrutiny committees are set up, clear guiding principles should be agreed to ensure that roles, responsibilities and relationships are clear. Above all, these principles should emphasise that the audit committee cannot under any circumstances abrogate its responsibilities, and remains responsible for reviewing the organisation’s system of integrated governance, risk management and internal control, across the whole of the organisation’s activities: Other ‘must haves’ include:

•  Any scrutiny committee that supports the audit committee should be led by a NED.
•  Any scrutiny committee should formally report back on its assurance role to the audit committee.
•  Joint planning meetings should be held between the audit
  committee and any scrutiny committees to ensure gaps and overlaps in the work plan are managed and assurance resources, such as internal audit, are identified.
•  The audit committee should not delegate the review of assurance reports to committees whose own effectiveness is reviewed within such reports.
•  If a scrutiny committee has decision-making responsibilities, it should not provide assurances in these areas.
•  Any scrutiny committee should receive and consider relevant internal audit reports and track the implementation of recommendations.
•  All committee terms of reference should clearly specify the scrutiny remit, any conflicting executive decision making responsibilities and reporting lines.

In summary, when considering where best to focus their time, it is crucial that audit committees carefully consider and coordinate their relationship with other supporting committees. The audit committee should recognise the work that is carried out and shape its agenda to discharge its responsibilities having assessed the extent, independence and quality of assurances that the board/governing body receives directly from elsewhere. 

Mike Townsend is regional managing director of TIAA and Derek Corbett is director of London Audit Consortium (Barts Health NHS Trust). Both are members of the HFMA Governance and Audit Committee