Financial Audit of Central Government and NHS Bodies in Wales 2007 _part3 ppt

21Financial Audit of Central Government and NHS Bodies in Wales 2007
3.11 In December 2006, the Assembly
Government implemented two new financial
systems - 'E-purchases' (a purchase ordering
system) and 'E grants' (a system for tracking
grants payable) - designed to improve the
quality and timeliness of resource-based
financial information available to
sub-accounting officers in controlling their
budgets.
3.12 Accurate and timely financial information
should be made available and utilised
throughout the year, and not just to support
the production of year-end accounts. The
systems recently implemented are intended to
support the Assembly Government's intention
to improve the financial information available
on a routine basis to support its business
activities and decision-making. Further
progress still needs to be made, however, to
ensure that the systems in place will deliver
the full range of benefits available from
resource accounting. My staff will continue to
work with and advise the Assembly
Government in taking forward developments
in this area.
The Whole of Government
Accounts project requires sound
financial systems that provide
prompt and accurate financial
information

3.13 The aim of HM Treasury's Whole of
Government Accounts project is to produce a
set of commercial style consolidated accounts
for the whole of the public sector across the
United Kingdom. It will make available for the
first time comprehensive audited public sector
information, based upon generally accepted
accounting principles. This will support
enhanced policy formulation and resource
allocation, and should contribute significantly
to fiscal management. The 2007 Budget
Report announced that the 2008/2009 set of
Whole of Government Accounts will be the
first to be published.
Better use of resource accounting will help to
enhance financial and risk management
Resource accounting is the application of accruals based
methods for reporting on the expenditure of central
government bodies and a framework for analysing that
expenditure against business objectives, relating this to
outputs wherever possible. It means, for example, that it is
when a transaction occurs that determines when it is
brought to account rather than the period in which the
related cash is received or paid. Financial statements
prepared on an accruals basis therefore provide a more
accurate record of resources expended.
More regular use of accruals based accounting information
by public sector organisations will bring several benefits:
Bodies will have access to regular accruals based
management accounts. These will inform

managements' decision making process, providing
a clearer picture of an organisations actual
performance.
Regular reviews of accruals based management
information will assist risk management by
providing better early warning signs of possible
over or under spends.
Closedown procedures in an organisation
producing regular accruals based information will
be more efficient, assisting bodies to meet
Treasury's faster closing initiative, and the Whole of
Government Accounts time-table.
The faster closing initiative ensures that audited
information is made available earlier, providing the
users of public sector accounts with more up to
date and relevant information.
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22 Financial Audit of Central Government and NHS Bodies in Wales 2007
3.14 As part of the Whole of Government Accounts
process, the Assembly Government is
responsible for preparing sub-consolidations
of financial information in Wales provided by
central government bodies (including the
Assembly Government itself), NHS trusts and
local authorities. The sub-consolidations are
submitted by the Assembly Government to
HM Treasury and audited by the Wales Audit
Office. There will also in future be a separate

Whole of Government of Wales Account,
prepared under the Government of Wales Act
2006, although a date for its first publication is
yet to be determined.
3.15 The requirement each year for audited bodies
to complete Whole of Government Accounts
information within a strict timetable is also
reinforcing the benefits of faster closing of
accounts.
3.16 My audit work on the 2005/2006 Whole of
Government Accounts submissions by audited
bodies was undertaken on a 'dry-run' basis.
While the dry-run process generally went
successfully, my audit highlighted a failure by
some bodies to accurately disclose their
transactions and balances with other public
sector bodies. This information is essential as
it has to be eliminated from the consolidated
Whole of Government Accounts to prevent
double counting of transactions and balances.
3.17 The accurate identification and agreement of
transactions and balances between public
bodies is probably the most significant risk
associated with the Whole of Government
Accounts process. Having arrangements in
place to do this should, in any case, be part of
sound financial management. Organisations
will need to establish better systems to
identify relevant transactions and balances
throughout the financial year, and become

more proactive in securing agreements with
other public sector bodies on amounts so that
accurate information can reported.
3.18 My staff will continue to work closely with
officials of the Assembly Government in
improving the guidance available to auditors
and audited bodies in this area. I also
welcome the contribution that the Wales Audit
Office is making to a Whole of Government
Accounts working group of the Public Audit
Forum. This forum brings together auditors
from across the UK of all bodies involved in
auditing Whole of Government Accounts
including other National Audit Agencies, the
Audit Commission, and representatives from
the private sector firms.
NHS bodies are currently
meeting risk management
standards but face new
challenges in relation to new
healthcare standards and
governance review
3.19 Effective risk management should represent
an integral part of corporate governance
arrangements within public sector bodies in
Wales. It is needed in order to ensure that
organisations can successfully manage the
internal and external risks that they face as
an organisation. All audited bodies have
continued to make good progress in

developing their risk management systems.
3.20 NHS bodies have an additional requirement
to complete a self-assessment each year
against the Welsh Risk Management (WRM)
standards. Governance is a specific standard
against which bodies are assessed, and this
examines the use and review of risk registers;
how well risk management is embedded
within the organisation; and sub-committees
setup to oversee Corporate Governance.
NHS bodies are expected to achieve a target
of 75 per cent against this standard, and all
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23Financial Audit of Central Government and NHS Bodies in Wales 2007
36 bodies successfully met this requirement
in 2005/2006. I am also satisfied that overall
NHS bodies are making good use of risk
registers in their business operations.
3.21 NHS bodies currently face further significant
challenges in respect of their corporate
governance systems. These include the
implementation of new health care standards,
and a detailed review of their current
governance frameworks.
3.22 The new framework of health care standards
outlined in Figure 9 will come into force in
2006/2007, as part of the ‘Making the
Connections’ agenda.

3.23 NHS bodies in Wales will need to review their
systems in all areas to ensure that they have
the necessary procedures in place to meet
the requirements of and report on these
standards.
3.24 The Director of NHS Wales has also
commissioned a review of corporate
governance within the NHS in Wales to
determine whether the NHS is evolving in
such a way as to meet the challenges ahead.
The review is being undertaken by the
National Leadership and Innovation Agency
for Healthcare (NLIAH) with support from the
Wales Audit Office. Figure 10 sets out the
Terms of Reference for the review.
3.25 I encourage all NHS bodies to take an active
part in the review, and to consider in detail
any recommendations that may arise. I will
also want to consider the results of the review
on its conclusion.
New Risk Management Standards
The Patient Experience
Services should be user friendly, patient centred,
and reflect the diverse needs and preferences of
the community
From April 2007 healthcare organisations in Wales will be required to
undertake self-assessments against these new standards, which will then
be validated by the Healthcare Inspectorate Wales. Whilst 2007 will be a
development year for this work, in future years these standards will be
used to inform and be reported in the Statement of Internal Control and the

Annual Reports. The intention is that the current WRM standards will be
incorporated into the new Healthcare Standards.
Clinical Outcomes
Services should be delivered as promptly as
possible
Healthcare Governance
Systems should be in place to support both
managerial and clinical leadership
Public Health
Healthcare organisations should collaborate with
relevant organisations and local communities to
ensure effective design and delivery of
programmes
Figure 9: NHS bodies will be assessed against new risk management standards in 2006/2007
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24 Financial Audit of Central Government and NHS Bodies in Wales 2007
The establishment of the Welsh
Consolidated Fund and National
Assembly for Wales Commission
present opportunities for locally
accountable Welsh spending as
well as associated risks which
the Auditor General will help the
Welsh Assembly Government to
manage
3.26 The Government of Wales Act 2006 received
Royal Assent on 25 July 2006 and came into
effect following the May 2007 Assembly

elections. The Act abolished the former
Assembly corporate body and reconstituted
the National Assembly as an unincorporated
association; as such it no longer has any
government functions. These functions now
rest with the Assembly Government, an entity
that is legally separate from the National
Assembly.
Welsh Consolidated Fund
3.27 The Act established a Welsh Consolidated
Fund (the Fund) from which the Assembly
Government and other bodies draw down
funds. The Parliamentary grant provided by
the Secretary of Sate for Wales is paid into
the Fund.
3.28 Payments out of the Fund are intended to
meet the costs of the Assembly Government’s
programmes, and need to be authorised
either via an Annual or Supplementary Budget
Motion of the Assembly. Each budget motion
specifies the amount of resources that may
be used; the amounts of accruing resources
that may be retained; and the amounts of
cash that may be issued from the Fund.
3.29 The Auditor General is required to give an
approval to draw down all sums payable from
the Fund and must be satisfied that each
payment is in accordance with the relevant
budget resolution.
National Assembly Commission

3.30 The National Assembly Commission (the
Commission) is a new corporate body
established under the 2006 Act. This body is
now responsible for providing the National
Assembly with property, staff and services.
3.31 The former Assembly recognised that there
were significant risks to be managed in
creating the new Commission out of the
former Assembly Parliamentary Services
department. In particular, as a separate
corporate body the Commission needed to
establish its own corporate governance and
financial management arrangements.
Figure 10: The NLIAH review will assist NHS bodies to further develop their corporate governance
systems by
Providing a baseline assessment for the Director, NHS Wales as Accounting Officer, on the standards of corporate
governance embedded and operating at Board level in the NHS in Wales;
Advising the Director, NHS Wales on how the existing governance framework can be improved, and on options for
future reform of the governance and accountability structure;
Helping NHS Boards to discharge their responsibilities effectively by working with them to develop and roll out a
tailored governance development programme designed to enhance Board level skills and strengthen the corporate
governance framework within their organisations; and
Contributing to the development of a more effective and joined-up framework for board members across the public
sector in Wales, contributing to taking forward the recommendations of the Beecham Report 'Beyond Boundaries'.
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25Financial Audit of Central Government and NHS Bodies in Wales 2007
3.32 In May 2006 a Shadow Commission was
established as an advisory committee to the

former Assembly. Its brief was to review and
recommend governance and financial
arrangements for the new Commission.
3.33 At the first meeting of the Commission
following the elections, specific governance
and financial management proposals were
formally presented and approved. However,
risk management arrangements are yet to be
fully developed and the new Commission will
need to embed these into its day to day
operations as soon as possible.
3.34 I look forward to working with the newly
formed Assembly and its corporate bodies,
and to continuing the productive relationship I
have always had with Assembly Government
management.
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26 Financial Audit of Central Government and NHS Bodies in Wales 2007
This Report covers the results of the examination of
all of the 2005/2006 accounts prepared by the
National Assembly and the other public bodies that I
audit. A complete listing is given below:
Accounts prepared by the National Assembly
Assembly Core Resource account
Assembly Consolidated Resource account
Health Commission Wales (Specialist
Services)
Welsh non-Domestic Rating

Summarised Account of local health boards
in Wales
Summarised Account of NHS trusts in Wales
Assembly Members' Pension Scheme
Account
AGSPBs
Arts Council of Wales
Care Council for Wales
Countryside Council for Wales
Health Professions Wales (abolished from 1
April 2006)
Higher Education Funding Council for Wales
Local Government Boundary Commission for
Wales
National Council for Education and Training
for Wales (abolished from 1 April 2006)
National Library of Wales
National Library of Wales - Staff
Superannuation Scheme Account
National Museums and Galleries of Wales
Qualifications, Curriculum and Assessment
Authority for Wales (abolished from 1 April
2006)
Sports Council for Wales
Sports Council for Wales Trust Account
Wales Centre for Health
Wales Tourist Board (abolished from 1 April
2006)
Welsh Development Agency (abolished from 1
April 2006)

Welsh Language Board
NHS trusts
Bro Morgannwg
Cardiff & Vale
Carmarthenshire
Ceredigion & Mid Wales
Conwy & Denbighshire
Gwent Healthcare
North East Wales
North Glamorgan
North West Wales
Appendix 1 - Accounts covered by this report
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27Financial Audit of Central Government and NHS Bodies in Wales 2007
Pembrokeshire & Derwen
Pontypridd & Rhondda
Swansea
Velindre
Welsh Ambulance Services
Local health boards
Anglesey
Blaenau Gwent
Bridgend
Caerphilly
Cardiff
Carmarthenshire
Ceredigion
Conwy

Denbighshire
Flintshire
Gwynedd
Merthyr Tydfil
Monmouthshire
Neath Port Talbot
Newport
Pembrokeshire
Powys
Rhondda Cynon Taf
Swansea
Torfaen
Vale of Glamorgan
Wrexham
Other bodies
Children's Commissioner for Wales
Estyn
Forestry Commission Wales
General Teaching Council for Wales
Public Services Ombudsman for Wales
Welsh accounts audited by the Comptroller and
Auditor General and laid before the National
Assembly
The Comptroller and Auditor General was
responsible for the audit of the following Welsh
accounts for 2005/2006:
Sports Council and Arts Council Lottery
Distribution Accounts
The Sports Council for Wales and the Arts Council
of Wales are Lottery distributors. Each prepares a

separate annual statement of account for the
discharge of their Lottery functions. These activities
are not devolved responsibilities and are instead
performed under delegated authority from the
Department of Culture, Media and Sport.
The European Agriculture Guidance and
Guarantee Fund
This European fund pays subsidies to Welsh
farmers, which are routed through the National
Assembly and the Countryside Council for Wales.
This is not a devolved function, and an annual
account is prepared by each body in the form
prescribed by the European Commission.
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Appendix 2 - List of Value for Money reports published in
2005/2006
List of Value for Money reports published in 2005/2006:
management of sickness absence in further education institutions in Wales;
progress in implementing the Committee's recommendation on the procurement of primary care
medicines;
the collapse of Antur Dwyryd Llyn;
contract for the provision of the out-of-hours GP service in Cardiff;
protecting NHS Trust staff from violence and aggression;
adult mental health services in Wales: a baseline review of service provision;
funding for the National Botanic Garden of Wales;
NHS energy management in Wales;
administration of Grants for Education Support and Training and the Better Schools Fund; and
the Merlin contract - enabling the National Assembly to change its business processes through ICT.

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