Agenda Document Pack - Midlothian Integration Joint Board - Audit and Risk Committee - 28/06/2023
Midlothian Council · 28 June 2023
Back to Midlothian Integration Joint Board - Audit and Risk Committee — 28 June 2023 and its agenda
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Notice of Meeting and Agenda Midlothian Integration Joint Board - Audit and Risk Committee Venue: Virtual Meeting, Date: Wednesday, 28 June 2023 Time: 14:00 Morag Barrow Chief Officer Contact: Clerk Name: Mike Broadway Clerk Telephone: 0131 271 3160 Clerk Email: mike.broadway@midlothian.gov.uk Further Information: This is a meeting which is open to members of the public. Page 1 of 122
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1 Welcome, Introductions and Apologies 2 Order of Business Including notice of new business submitted as urgent for consideration at the end of the meeting. 3 Declaration of Interest Members should declare any financial and non-financial interests they have in the items of business for consideration, identifying the relevant agenda item and the nature of their interest. 4 Minute of Previous Meeting 4.1 Minutes of Midlothian Integration Joint Board Audit & Risk 01 December 2022 submitted for approval 3 - 6 5 Public Reports 5.1 Midlothian Integration Joint Board Annual Audit Plan 202223 – Audit Scotland 7 - 24 5.2 Midlothian Integration Joint Board Internal Audit Annual Assurance Report 2022-23 - Chief Internal Auditor 25 - 42 5.3 Midlothian Integration Joint Board Draft Unaudited Annual Accounts 202223 – Chief Finance Officer 43 - 88 5.4 Midlothian Integration Joint Board Risk Register Q3 and Q4 - Chief Officer Place 89 - 102 5.5 Midlothian Integration Joint Board Internal Audit Annual Plan 2023-24 - Chief Internal Auditor 103 - 108 5.6 Midlothian Integration Joint Board Medium Term Financial Planning Report - Chief Internal Auditor 109 - 122 6 Private Reports No items for discussion 7 Date of Next Meeting The next meeting will be held on Thursday 7 September 2023 at 2 pm Page 2 of 122
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Midlothian Integration Joint Board Meeting Date Time Venue Audit and Risk Committee Thursday 1 December 2022 2.00pm Virtual Meeting held using MS Teams. Present (voting members): Cllr Colin Cassidy (Chair) Nadin Akta Jock Encombe Present (non-voting members): Morag Barrow (Chief Officer) Claire Flanagan (Chief Finance Officer) Derek Oliver (Chief Officer Place) In attendance: Patricia Fraser (Audit Scotland, External Auditor) Andrew Henderson (Democratic Services Officer) Apologies: Elaine Greaves (Principal Internal Auditor) MIJB Audit and Risk Committee Thursday 2 March 2023 Item No 4.1 Page 3 of 122
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2 Audit and Risk Committee Thursday 1 December 2022 1. Welcome and introductions As a result of technical issues being faced by the chair, it was agreed that in her capacity as Chief Officer of the MIJB Morag Barrow would oversee the smooth conduct of business on the chair’s behalf. 2. Order of Business The Order of Business was as detailed in the agenda. 3. Declarations of interest No declarations of interest were received. 4. Minutes of Meeting 4.1 The Minutes of Meeting of the Audit and Risk Committee held on 01 September 2022 was submitted and approved as a correct record. 4.2 Matters Arising: Questions were raised in relation to the Executive Business Managers action under item 5.3 with regard to the review of the strategic risk profile. The Chief Officer confirmed that this would be brought to the subsequent meeting as an action following the approval of the new format. Following further discussion the Chief Officer Place agreed that new format would be submitted to the next meeting. Action: Chief Officer Place to submit risk profiles in updated format for next meeting. 5. Public Reports Report Title/Summary Decision Action Owner Date to be Completed/Comments 5.1 Risk Register – Report by Chief Officer Place Page 4 of 122
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3 Audit and Risk Committee Thursday 1 December 2022 Report Title/Summary Decision Action Owner Date to be Completed/Comments Details were provided in relation to the report and reference was made to the strategic risk profile for Quarter two 2022/23, ongoing consultations in relation to the National Care Bill reference was also made with regard high risks in relation to workforce. In response to questions relating to workforce and ways to mitigate risks going forward, the Chief Officer highlighted that the HSCP 3 year workforce plan outlined future options and confirmed that senior staff were sighted on this. The Chief Officer made further reference to the negative impact of the COVID pandemic on staff moral and highlighted that the learning and development team have undertaken work in relationship to apprenticeships and a volunteer co coordinator post had been approved to look at further options within the third sector to help mitigate staffing pressures. Noted the strategic risk profiles. All to note. 5.2 MIJB Recommendations Internal Audit Follow-up Review - Completed Actions and In Progress Actions - Report by Principal Internal Auditor. In speaking to the report the Chief Finance Officer provided a brief overview of the report making reference to the progress made reference to actions undertaken to address issues and recommendations raised by internal audit. Members then took the opportunity to thank the Chief Finance Officer for the quality of the report. a) Members noted the progress made by Management in implementing Internal Audit recommendations to improve internal controls and governance, and mitigate risks and; b) Noted the progress made by Management and any other actions required; and c) Noted that Internal Audit will continue to monitor the completion of the outstanding recommendations and will provide update reports to the MIJB Audit and Risk Committee. All to note All to note All to note Page 5 of 122
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4 Audit and Risk Committee Thursday 1 December 2022 Report Title/Summary Decision Action Owner Date to be Completed/Comments 5.3 Update on Actions from the Independent Audit for 2021/22 of Midlothian IJB - Report by Chief Finance Officer. The Chief Finance Officer provided a brief overview in relation to the report making reference to the Audit findings and recommendations in addition to the MIJB’s response. Members took the opportunity to raise questions in relation to the lack of a formal statement on the corporate support arrangements and discussions particularly the CFO capacity and requested that the report for the next meeting cover this area in more specificity. The Chief Finance Officer agreed to pursue this and update members accordingly. a) Chief Financial Officer to provide more specific information in relation to the corporate support arrangements and; b) To otherwise note the update to the audit actions Chief Finance Officer All to note 6. Private Reports No private business to be discussed at this meeting. 7. Date of next meeting The next meeting of the Midlothian Integration Joint Board Audit and Risk Committee would be held on Thursday 2 December 2021 at 2 pm. (Action: All Members to Note) The meeting terminated at 2.41 pm. Page 6 of 122
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Prepared for Midlothian Integration Joint Board March 2023 Midlothian Integration Joint Board Annual Audit Plan 2022/23 MIJB Audit & Risk Committee Wednesday 28 June 2023 Item No 5.1 Page 7 of 122
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Midlothian Integration Joint Board Annual Audit Plan 2022/23 | 2 1. Contents Introduction 3 Financial statements audit planning 5 Wider Scope and Best Value 9 Reporting arrangements, timetable, and audit fee 11 Other matters 14 Appendix 1. Your audit team 16 Page 8 of 122
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Introduction | 3 Introduction Summary of planned audit work 1. This document summarises the work plan for our 2022/23 external audit of Midlothian Integration Joint Board. The main elements of our work include: • evaluation of the key controls within the main accounting systems • an audit of the financial statements, and provision of an Independent Auditor’s Report • an audit opinion on the other statutory information published within the Annual Accounts including the Performance Report, the Governance Statement and aspects of the Remuneration and Staff Report • consideration of arrangements in relation to wider scope areas: financial management; financial sustainability; vision, leadership and governance; and use of resources to improve outcomes • consideration of Best Value arrangements. Audit Appointment 2. We are pleased to be appointed as the external auditor of Midlothian Integration Joint Board for the period 2022/23 to 2026/27 inclusive. You can find a brief biography of your audit team at Appendix 1. 3. In the first year of the audit appointment, we invest significant time gaining an understanding of your business and identifying and assessing the risks of material misstatement to the financial statements. While we use our initial assessment of risk to inform our planned audit approach, we keep our assessment of risks under review as the audit progresses. We will inform you of any significant changes in assessed risks and any resulting changes in our planned audit work. 4. The audit team will actively engage with you over the course of the audit to ensure our audit work continues to be focused on audit risk. Adding value 5. We aim to add value to Midlothian Integration Joint Board through our external audit work by being constructive and forward looking, by attending meetings of the Audit and Risk Committee and by recommending and encouraging good practice. In so doing, we will help Midlothian Integration Joint Board promote improved standards of governance, better management and decision making and more effective use of resources. Page 9 of 122
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Introduction | 4 Respective responsibilities of the auditor and Midlothian Integration Joint Board 6. The Code of Audit Practice 2021 sets out in detail the respective responsibilities of the auditor and Midlothian Integration Joint Board. Key responsibilities are summarised below. Auditor responsibilities 7. Our responsibilities as independent auditors are established by the Local Government (Scotland) Act 1973 and the Code of Audit Practice (including supplementary guidance) and guided by the Financial Reporting Council’s Ethical Standard. 8. Auditors in the public sector give an independent opinion on the financial statements and other information within the annual report and accounts. We also review and report on the wider scope arrangements in place at Midlothian Integration Joint Board. In doing this, we aim to support improvement and accountability. Midlothian Integration Joint Board responsibilities 9. Midlothian Integration Joint Board is responsible for maintaining accounting records and preparing financial statements that give a true and fair view. 10. Midlothian Integration Joint Board has the primary responsibility for ensuring the proper financial stewardship of public funds, compliance with relevant legislation and establishing effective arrangements for governance, propriety and regularity that enable them to deliver their objectives. Page 10 of 122
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Financial statements audit planning | 5 Financial statements audit planning Introduction 11. The Annual Accounts are an essential part of demonstrating Midlothian Integration Joint Board’s stewardship of resources and its performance in the use of those resources. 12. We focus our work on the areas of highest audit risk. As part of our planning process, we prepare a risk assessment highlighting the audit risks relating to each of the main financial systems relevant to the production of the financial statements. Materiality 13. The concept of materiality is applied by auditors in planning and performing the audit, and in evaluating the effect of any uncorrected misstatements on the financial statements. We are required to plan our audit to determine with reasonable confidence that the financial statements are free from material misstatement. The assessment of what is material is a matter of professional judgement over both the amount and the nature of the misstatement. Materiality levels for the 2022/23 audit 14. We assess materiality at different levels as described in Exhibit 1. The materiality values for Midlothian Integration Joint Board are set out in Exhibit 1. Exhibit 1 2022/23 Materiality levels for Midlothian Integration Joint Board Materiality Amount Planning materiality – This is the figure we calculate to assess the overall impact of audit adjustments on the financial statements. Materiality has been set based on our assessment of the needs of the users of the financial statements and the nature of Midlothian Integration Joint Board’s operations. For the year ended 31 March 2023 we have set our materiality at 2% of gross expenditure based on the audited financial statements for 2021/22. £3.4 million Performance materiality – This acts as a trigger point. If the aggregate of errors identified during the financial statements audit exceeds performance materiality, this could indicate that further audit procedures should be considered. Using our professional judgement, we have assessed performance materiality at 75% of planning materiality. £2.5 million Page 11 of 122
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Financial statements audit planning | 6 Reporting threshold (ie clearly trivial) – We are required to report to those charged with governance on all unadjusted misstatements more than the ‘reporting threshold' amount. £170,000 Source: Audit Scotland Significant risks of material misstatement to the financial statements 15. Our risk assessment draws on our cumulative knowledge of Midlothian Integration Joint Board, its major transaction streams, key systems of internal control and risk management processes. It is informed by our discussions with management, meetings with internal audit, attendance at committees and a review of supporting information. 16. Audit risk assessment is an iterative and dynamic process. Our assessment of risks set out in this plan may change as more information and evidence becomes available during the progress of the audit. Where such changes occur, we will advise management and, where relevant, report them to those charged with governance. 17. Based on our risk assessment process, we identified the following significant risk of material misstatement to the financial statements. This is the risk which has the greatest impact on our planned audit procedures. Exhibit 2 summarises the nature of the risk, the sources of assurance from management arrangements and the further audit procedures we plan to perform to gain assurance over the risk. Exhibit 2 2022/23 Significant risk of material misstatement to the financial statements Significant risk of material misstatement Sources of assurance Planned audit response 1. Risk of material misstatement due to fraud caused by management override of controls As stated in International Standard on Auditing (UK) 240, management is in a unique position to Owing to the nature of this risk, assurances from management are not applicable in this instance • Agreement of balances and transactions to Midlothian Council and NHS Lothian financial reports/ledger and correspondence. • Constituent body auditor assurances will be obtained over the completeness, accuracy and allocation of income and expenditure to Midlothian Integration Joint Board activities included in the Annual Accounts. • Review of year end adjustments and journals. Page 12 of 122
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Financial statements audit planning | 7 Significant risk of material misstatement Sources of assurance Planned audit response perpetrate fraud because of management’s ability to override controls that otherwise appear to be operating effectively. Source: Audit Scotland 18. As set out in International Standard on Auditing (UK) 240: The auditor’s responsibilities relating to fraud in an audit of financial statement, there is a presumed risk of fraud over the recognition of revenue. There is a risk that revenue may be misstated resulting in a material misstatement in the financial statements. 19. Midlothian Integration Joint Board is wholly funded by Midlothian Council and NHS Lothian. We assess that the risk of material misstatement arising from fraud over income is limited. This limitation is to such an extent that we have excluded the risk of fraud over income from our significant audit risks. 20. In line with Practice Note 10: Audit of financial statements and regularity of public sector bodies in the United Kingdom, as most public-sector bodies are net spending bodies, the risk of material misstatement due to fraud related to expenditure recognition may in some cases be greater than the risk relating to revenue recognition. 21. We have rebutted this risk on the basis that all transactions are processed by the partner bodies rather than Midlothian Integration Joint Board directly and that all expenditure is undertaken by the partners who are public sector bodies. 22. We have not, therefore, incorporated specific work into our audit plan in these areas over and above our standard audit procedures. Other areas of audit focus 23. As part of our assessment of audit risks, we have identified one other area where we consider there is a risk of material misstatement to the financial statements. Based on our assessment of the likelihood and magnitude of the risk, we do not consider it to represent a significant risk. We will keep this area under review as our audit progresses. Page 13 of 122
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Financial statements audit planning | 8 24. The area of specific audit focus relates to the risk of misstatement in Midlothian Integration Joint Board accounts and disclosures if there is a lack of clarity in the amount and accounting treatment of the proposed reduction in allocation of 2022/23 NHS funding to the health and social care partnership. Page 14 of 122
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Wider Scope and Best Value | 9 Wider Scope and Best Value Introduction 25. The Code of Audit Practice sets out the four areas that frame the wider scope of public sector audit. The Code of Audit Practice requires auditors to consider the adequacy of the arrangements in place for the wider scope areas in audited bodies. 26. In summary, the four wider scope areas cover the following: • Financial management means having sound budgetary processes. We will consider the arrangements to secure sound financial management, and arrangements to prevent and detect fraud, error and other irregularities, fraud and corruption. • Financial sustainability – means being able to meet the needs of the present without compromising the ability of future generations to meet their own needs. We will consider the extent to which audited bodies have shown regard to financial sustainability and are planning ahead effectively. We look at planning for the medium term (two to five years) and longer term (longer than five years). We will also comment on financial sustainability in the longer term. • Vision, leadership and governance – Audited bodies must have a clear vision and strategy, and work together with partners and communities to improve outcomes. set priorities for improvement. We will consider the arrangements in place to deliver the vision, strategy and priorities adopted by Midlothian Integration Joint Board. We will also consider the effectiveness of the governance arrangements to support delivery. • Use of resources to improve outcomes – Audited bodies must make best use of their resources to meet stated outcomes and improvement objectives. Wider scope risks 27. We have identified wider scope audit risks in the areas set out in Exhibit 4. This exhibit sets out the risks, sources of assurance from management arrangements and the further audit procedures we plan to perform to gain assurances over the risks. Exhibit 4 2022/23 wider scope risks Page 15 of 122
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Wider Scope and Best Value | 10 Description of risk Sources of assurance Planned audit response 2.Financial sustainability Midlothian Integration Joint board (the IJB) has developed a rolling five year financial plan for the period 2022/23 to 2026/27. The latest plan is forecasting a cumulative funding gap of £12 million to 2026/27. The latest cost pressures and inflation figures have been applied in the financial plan but these pressures will continue to present significant challenges to financial planning and the ability of the IJB to deliver quality services. • IJB Financial monitoring reports and other financial reports to the IJB included budget reports and longer-term financial plans. • This IJB risk register presented to the IJB Audit & Risk Committee Perform a review of the five year financial plan , providing comment in our Annual Audit Report. Source: Audit Scotland 28. Our planned work on our wider scope responsibilities is risk based and proportionate and in addition to local risks we consider challenges which are impacting the public sector as a whole. In 2022/23 we will consider how public sector bodies are responding to cyber security threats. Cyber Security 29. There continues to be a significant risk of cyber-attacks to public bodies, and it is important that they have appropriate cyber security arrangements in place. A number of recent incidents have demonstrated the significant impact that a cyber-attack can have on both the finances and operation of an organisation. In 2022/23, we will extend our assurance requirements from the auditors of the two partners in order to learn about Midlothian Council and NHS Lothian’s arrangements for managing and mitigating cyber security risks. Best Value 30. Integration Joint Boards have a statutory duty to make arrangements to secure Best Value. We will consider how Midlothian Integration Joint Board demonstrates that it is meeting its Best Value responsibilities and we will report our findings as part of our Annual Audit Report. Page 16 of 122
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Reporting arrangements, timetable, and audit fee | 11 Reporting arrangements, timetable, and audit fee Reporting arrangements 31. Audit reporting is the visible output for the annual audit. All Annual Audit Plans and the outputs, as detailed in Exhibit 6, and any other outputs on matters of public interest will be published on our website: www.audit-scotland.gov.uk. 32. Matters arising from our audit will be reported on a timely basis and will include agreed action plans. Draft management reports will be issued to the relevant officers to confirm factual accuracy. 33. We will provide an independent auditor’s report to Midlothian Integration Joint Board and the Accounts Commission setting out our opinions on the Annual Accounts. We will provide Midlothian Integration Joint Board and the Accounts Commission with an annual report on the audit containing observations and recommendations on significant matters which have arisen during the audit. 34. Exhibit 6 outlines the target dates for our audit outputs, and we aim to issue the independent auditor’s report by the statutory deadline of 30 September 2023. Exhibit 6 2020/21 Audit outputs Audit Output Target date Audit and Risk Committee Date Annual Audit Plan 31/02/2023 02/03/2023 Independent Auditor's Report 30/09/2023 21/09/2023 Annual Audit Report 30/09/2023 21/09/2023 Source: Audit Scotland Timetable 35. To support an efficient audit, it is critical that the timetable for producing the annual report and accounts for audit is achieved. We have included a proposed timetable for the audit at Exhibit 7 that has been discussed with management. Page 17 of 122
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Reporting arrangements, timetable, and audit fee | 12 36. Covid-19 has had a considerable impact on the conduct and timeliness of the audit. We recognise that it is in the best interests of public accountability to get the reporting of audited accounts back to pre-pandemic timelines. We are identifying ways to work more efficiently to expedite the 2022/23 audits whilst at the same time maintaining high standards of audit quality. 37. We intend to take a hybrid approach to the 2022/23 audit with a blend of onsite and remote working. We will continue to work closely with management to identify the most efficient approach as appropriate and will keep timeframes and logistics for the completion of the audit under review. Progress will be discussed with management and finance officers over the course of the audit. Exhibit 7 Proposed annual report and accounts timetable Key stage Provisional Date Consideration of the unaudited Annual Accounts by those charged with governance 30 June 2023 Latest submission date for the receipt of the unaudited Annual Accounts with complete working papers package. 30 June 2023 Latest date for final clearance meeting with the Chief Finance Officer 31 August 2023 Issue of draft Letter of Representation and proposed Independent Auditor’s Report 7 September 2023 Agreement of audited and unsigned Annual Accounts 21 September 2023 Issue of Annual Audit Report to those charged with governance. 21 September 2023 Signed Independent Auditor’s Report 21 September 2023 Source: Audit Scotland Audit fee 38. In determining the audit fee, we have taken account of the risk exposure of the Midlothian Integration Joint Board and the planned management assurances in place. The agreed audit fee for 2022/23 is £31,470 (2021/22: £27,960). 39. Our fees have increased in 2022/23 and this is a reflection of the current audit market and the rising costs in delivering high quality audit work. There are increased regulatory expectations and risks placed on audit and its quality, as well as a widening in the scope of work audit must cover. Page 18 of 122
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Reporting arrangements, timetable, and audit fee | 13 40. In setting the fee for 2022/23 we have assumed that Midlothian Integration Joint Board has effective governance arrangements and will prepare comprehensive and accurate accounts for audit in line with the agreed timetable for the audit. The audit fee assumes there will be no major change in respect of the scope of the audit during the year and where our audit cannot proceed as planned, a supplementary fee may be levied. Page 19 of 122
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Other matters | 14 Other matters Internal audit 41. It is the responsibility of the Midlothian Integration Joint Board to establish adequate internal audit arrangements. We will review the internal audit plan and the results of internal audit’s work. 42. While we are not planning to place formal reliance on the work of internal audit in 2022/23, we will review internal audit reports and assess the impact of the findings on our financial statements and wider scope audit responsibilities. Independence and objectivity 43. Auditors appointed by the Auditor General for Scotland or Accounts Commission must comply with the Code of Audit Practice and relevant supporting guidance. When auditing the financial statements, auditors must also comply with professional standards issued by the Financial Reporting Council and those of the professional accountancy bodies. These standards impose stringent rules to ensure the independence and objectivity of auditors. 44. Audit Scotland has robust arrangements in place to ensure compliance with these standards including an annual ‘fit and proper’ declaration for all members of staff. The arrangements are overseen by the Executive Director of Innovation and Quality, who serves as Audit Scotland’s Ethics Partner. 45. The appointed auditor for Midlothian Integration Joint Board is Gillian Woolman, Audit Director. Auditing and ethical standards require the appointed auditor to communicate any relationships that may affect the independence and objectivity of audit staff. We are not aware of any such relationships pertaining to the audit of Midlothian Integration Joint Board. 46. The appointed auditor for Midlothian Integration Joint Board will be changing from 31 March 2023. Audit Scotland has put in place a handover process to ensure a smooth transition. Midlothian Integration Joint Board will be advised of the new appointed auditor in due course. Audit Quality 47. Quality is at the core of public audit in Scotland and is the foundation for building consistency and confidence across all audit work. High quality audits provide assurance, add value, and can support public bodies to achieve their objectives. 48. Until 2021/22, the applicable audit quality standard was International Standard on Quality Control 1 (ISQC (UK) 1). This set out an audit practice’s responsibilities for its system of quality control for audits. Page 20 of 122
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Other matters | 15 49. ISQC(UK) 1 has been replaced by two new audit quality standards: Internal Standards on Quality Management (ISQM (UK) 1) applicable from 15 December 2022 and (ISQM(UK) 2) effective for the 2023/24 audits. Work is underway at Audit Scotland to meet the requirements of these quality standards. 50. Audit Scotland is committed to delivering high quality audits. The foundation of our quality framework is our Audit Guide, which incorporates the application of professional auditing, quality and ethical standards and the Code of Audit Practice (and supplementary guidance) issued by Audit Scotland and approved by the Auditor General for Scotland. To ensure that we achieve the required quality standards, Audit Scotland conducts peer reviews and internal quality reviews. Additionally, the Institute of Chartered Accountants of England and Wales (ICAEW) have been commissioned to carry out external quality reviews. 51. As part of our commitment to quality and continuous improvement, Audit Scotland will periodically seek your views on the quality of our service provision. We welcome feedback at any time, and this may be directed to the engagement lead. Page 21 of 122
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Appendix 1. Your audit team | 16 Appendix 1. Your audit team 52. The audit team involved in the audit of Midlothian Integration Joint Board have significant experience in public sector audit. Gillian Woolman Audit Director gwoolman@audit- scotland.gov.uk Gillian has 27 years of public sector audit experience. She has been an engagement lead since 2001 in the local government, central government and NHS sectors. She is a member of ICAEW and CIPFA UK-wide committees. Patricia Fraser Senior Audit Manager pfraser@audit-scotland.gov.uk Patricia has 25 years of public sector audit experience and has delivered external audit services to a range of bodies including local authorities, health boards and central government bodies. Kay Jenks Audit Manager kjenks@audit- scotland.gov.uk Kay has considerable experience in planning and delivering audits. Kay will manage the team and work alongside the Senior Audit Manager and Audit Director to deliver the audit. 53. The local audit team is supported by a specialist technical accounting team, all of whom have significant experience of public bodies and work with accounting regulatory bodies. Page 22 of 122
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Appendix 1. Your audit team | 17 Midlothian Integration Joint Board Annual Audit Plan 2022/23 Audit Scotland’s published material is available for download on the website in a number of formats. For information on our accessibility principles, please visit: www.audit-scotland.gov.uk/accessibility For the latest news follow us on social media or subscribe to our email alerts. Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 Email: info@audit-scotland.gov.uk www.audit-scotland.gov.uk AS.4.0 Page 23 of 122
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Midlothian IJB Audit and Risk Committee 28 June 2023 at 2pm Midlothian Health and Social Care Integration Joint Board Internal Audit Annual Assurance Report 2022/23 Executive summary The purpose of this report is to present the Internal Audit Annual Assurance Report 2022/23 for the Midlothian Health and Social Care Integration Joint Board (MIJB) which includes the Chief Internal Auditor’s independent assurance opinion on the adequacy of MIJB's overall control environment for the year ended 31 March 2023. The MIJB Audit and Risk Committee is therefore asked to: (a) Consider the Midlothian Health and Social Care Integration Joint Board Internal Audit Annual Assurance Report 2022/23 (Appendix 1), which sets out the findings and conclusions arising from all Internal Audit work for the year to 31 March 2023, consider the assurances contained therein, and provide any commentary thereon. (b) Consider the list of Internal Audit reports by Partners’ Internal Auditors presented to their respective Audit Committees that are relevant to MIJB for assurance purposes (Appendix 2), and note that the MIJB Chief Internal Auditor has taken account of these assurances from Partners’ Internal Audit providers to provide the statutory Internal Audit assurance to the MIJB. # Item number: Agenda number Page 25 of 122
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Midlothian Integration Joint Board Report Midlothian Health and Social Care Integration Joint Board Internal Audit Annual Assurance Report 2022/23 1 Purpose 1.1 The purpose of this report is to present the Internal Audit Annual Assurance Report 2022/23 for the Midlothian Health and Social Care Integration Joint Board (MIJB) which includes the Chief Internal Auditor’s independent assurance opinion on the adequacy of the arrangements for governance, risk management and internal control by the MIJB of the delegated resources. 2 Recommendations 2.1 Members of the MIJB Audit and Risk Committee are asked to: a) Consider the MIJB Internal Audit Annual Assurance Report 2022/23 (Appendix 1), which sets out the findings and conclusions arising from all Internal Audit work carried out for the year to 31 March 2023, consider the assurances contained therein, and provide any commentary thereon. b) Consider the list of Internal Audit reports by Partners’ Internal Auditors presented to their respective Audit Committees that are relevant to MIJB for assurance purposes (Appendix 2), and note that the MIJB Chief Internal Auditor has taken account of these assurances to provide the statutory Internal Audit assurance to the MIJB. 3 Background and main report 3.1 The Midlothian Integration Joint Board (MIJB), established as a separate legal entity as required by the Act, is responsible for the strategic planning and commissioning of a wide range of integrated health and social care services across the Midlothian partnership area, based on resources which have been delegated to it by the partners, Midlothian Council and NHS Lothian. 3.2 The MIJB is therefore expected to operate under public sector good practice governance arrangements which are proportionate to its transactions and responsibilities to ensure the achievement of the objectives of Integration. The establishment of robust Risk Management and Audit arrangements is one of the key components of good governance and will be critical to the capacity of the MIJB to function effectively. 3.3 The Public Sector Internal Audit Standards (PSIAS) require the MIJB’s Chief Internal Auditor to prepare an annual report that incorporates the opinion on the adequacy and effectiveness of MIJB’s framework of governance, risk management and control, a summary of the work that supports the opinion, and a statement on conformance with the PSIAS. Page 26 of 122
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Midlothian Integration Joint Board 3.4 The MIJB Internal Audit Annual Assurance Report 2022/23 (Appendix 1) includes the MIJB Chief Internal Auditor’s independent and objective opinion regarding the adequacy and effectiveness of governance, risk management and internal control within the MIJB to fulfil the statutory role of Internal Audit. To ensure the annual reporting requirements of the Public Sector Internal Audit Standards (PSIAS) are met, the Report also includes a summary of the Internal Audit activity during the year that supports the opinion, and summarises the outcome of the self- assessment of the Internal Audit service against the Public Sector Internal Audit Standards (PSIAS). 3.5 The Report provides assurances in relation to the MIJB’s corporate governance framework that is a key component in underpinning delivery of the MIJB’s strategic priorities and has been used to inform the Chief Officer’s Annual Governance Statement 2022/23. 3.6 In addition to its own governance arrangements, the MIJB places reliance on the governance arrangements adopted by NHS Lothian and Midlothian Council, the partners. Where appropriate, existing mechanisms embedded within both NHS Lothian and Midlothian Council have been used to provide assurance to the MIJB. 3.7 The Appendix 2 to this report provides the list of Internal Audit reports by Partners’ Internal Audit providers (MLC Internal Audit for Midlothian Council; NHSL Internal Audit for NHS Lothian) that have been presented to their respective Audit Committees within the second half year 2022/23 which are relevant to MIJB for assurance purposes, with a summary of assurances contained therein. The MIJB Chief Internal Auditor has taken account of these assurances from Partners’ Internal Auditors to provide the annual assurance to the MIJB. 4 Directions 4.1 There are no Directions implications arising from this report. 5 Equalities Implications 5.1 There are no direct equalities implications arising from this report. 6 Resource Implications 6.1 There is a commitment to provide Internal Audit resource to the Midlothian Health and Social Care Integration Joint Board (MIJB) for review of the adequacy of the arrangements for risk management, governance and control by the MIJB of the delegated resources. 6.2 Internal Audit service is provided by Midlothian Council’s Internal Audit team, which has a shared service arrangement with East Lothian Council including the appointed Chief Internal Auditor (from January 2023). This is also supported by specific resource from the NHS Lothian Internal Audit team reporting to the Chief Internal Auditor. The staff who performed the MIJB Internal Audit work hold relevant professional qualifications and have the necessary experience, knowledge, skills and competencies (such as the Code of Ethics set out in the PSIAS). Page 27 of 122
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Midlothian Integration Joint Board 6.3 The Midlothian Internal Audit Annual Plan 2022/23 approved by the MIJB Audit and Risk Committee on 3 March 2022 was based on the assumption that Midlothian Council’s Internal Audit function provides 40 days and NHS Lothian Internal Audit team provides 30 days to support the delivery of the Plan. A summary of the Internal Audit work that was undertaken during the year that supports the annual opinion is stated in Appendix 1. 7 Risk 7.1 The PSIAS require Internal Audit to evaluate the effectiveness of the MIJB’s Risk Management arrangements and contribute to improvements in the process. Key components of the audit planning process include a clear understanding of the MIJB’s functions, associated risks, and potential range and breadth of audit areas for inclusion within the Plan to provide the audit opinion. Internal Audit work carried out has been risk-based and, where appropriate, has tested the management of risk by the MIJB of the delegated resources. 7.2 Internal Audit provides assurance to MIJB Management, Audit and Risk Committee and the Board on the adequacy and effectiveness of internal controls and governance within the MIJB, including risk management, and to highlight good practice and recommend improvements. 7.3 It is anticipated that improvements in the management and mitigation of risks will arise as a direct result of MIJB Management implementing the Internal Audit recommendations. 8 Involving people 8.1 The MIJB Chief Officer, Chief Finance Officer and Integration Manager have received the MIJB Internal Audit Annual Assurance Report 2022/23 that sets out the work of Internal Audit and independent opinion on the adequacy and effectiveness of the governance, risk management and internal controls to assist them in discharging their roles and responsibilities. The MIJB Chief Officer has considered the Internal Audit findings and conclusions detailed in the above Report when completing the MIJB’s Annual Governance Statement 2022/23. 9 Background Papers 9.1 Midlothian IJB Internal Audit Annual Plan 2022/23 (approved by the MIJB Audit and Risk Committee on 3 March 2022) AUTHOR’S NAME Duncan Stainbank DESIGNATION MIJB Chief Internal Auditor CONTACT INFO DATE 19 June 2023 Page 28 of 122
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Internal Audit Annual Assurance Report 2022/23 for Midlothian Health and Social Care Integration Joint Board 1 Introduction 1.1 The Public Sector Internal Audit Standards (PSIAS) (2017) requires that: “The chief audit executive [MIJB’s Chief Internal Auditor] must deliver an annual internal audit opinion and report that can be used by the organisation to inform its governance statement. The annual internal audit opinion must conclude on the overall adequacy and effectiveness of the organisation’s framework of governance, risk management and control. The annual report must incorporate: • the opinion; • a summary of the work that supports the opinion; and • a statement on conformance with the Public Sector Internal Audit Standards and the results of the quality assurance and improvement programme.” 2 Opinion on the Governance, Risk Management and Internal Control 2.1 My opinion is that the Midlothian Health and Social Care Integration Joint Board’s governance arrangements, risk management and systems of internal control are operating satisfactorily. There has been good progress made by Management during the year with the completion of recommendations despite ongoing challenges of recovery from the Covid-19 pandemic. 2.2 The MIJB operates under good public sector practice governance arrangements through its Board and Committee meetings that support scrutiny and transparency of decisions made. There is good compliance by the MIJB of the requirements of the Public Bodies (Scotland) Act 2014 and the guidance through its Directions to Partners (NHS Lothian and Midlothian Council) for the delivery of the services. The vision, strategic objectives and outcomes going forward are reflected following extensive consultation in the Strategic Plan 2022-2025, approved by the Board in April 2022. The MIJB is making continued progress towards delivering integrated Health and Social Care services but has more to do, in common with other IJBs. 2.3 The current MIJB Local Code of Corporate Governance (Local Code), which was approved by the Board on 8 April 2021, sets out the framework and key principles, which require to be complied with, to demonstrate effective governance. The Local Code complies with the CIPFA/SOLACE ‘Delivering Good Governance in Local Government Framework’ (2016) in all significant aspects. It reflects the changing context of integration and the appropriate framework for effective governance of the MIJB’s business, including its role as the strategic commissioning body i.e. setting out when responsibility lies with the Board or where reliance is placed on the arrangements in place at its Partners. Governance arrangements in place are generally sound and are being further developed. The Internal Audit high level review and assessment of the Local Code has identified aspects of governance arrangements where some improvement is required. Page 29 of 122
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2.4 A Risk Management strategy, reporting regime and risk register highlighting the MIJB strategic risks, mitigating controls, residual risk and accompanying actions have been regularly reviewed, updated and reported during the year to the Audit and Risk Committee to fulfil its oversight role to monitor the IJB’s risk management arrangements. 2.5 Appropriate medium term financial planning arrangements had been put in place in December 2022 with the presentation of the medium term financial plan to the Board, although improvement is required to develop the explicit link to the 2022-2025 strategic plan. Projections in February 2023 highlighted a £4.3million financial gap. In March 2023 further movement regarding prescribing expenditure and the reduction of £1.3m by Midlothian Council to the IJB budget moved the IJB’s projected gap for 2023/24 to £6m before any recovery action. Financial recovery plans of £4.7million were already agreed and financial recovery plans for the remaining gap have been developed and presented to the Board. The additional recovery plans have not (at the time of completion of this report) been formally approved by the Board. Further work is required to ensure that sustainable financial plans remain in place and clarity on the appropriate governance reporting against recovery plans finalised. 2.6 Further improvements in governance, risk management and internal control will be made by Management through the full implementation of previous Internal Audit recommendations. Internal Audit will continue to follow-up on their implementation and present progress reports. 3 Scope of the Internal Audit Annual Plan 2022/23 3.1 We summarise below the work we have undertaken to obtain assurances over the arrangements in place for each area considered and our conclusions on the effectiveness and appropriateness of these arrangements are listed in section 4. Local Code of Corporate Governance 3.2 In considering the delivery of integrated services, we carried out a high level review of the Local Code of Corporate Governance to assess compliance with the requirements of the following seven core principles set out in the 2016 CIPFA/SOLACE Framework: • clarity of roles and responsibilities including arrangements for the operation of Standing Orders; • behaving with integrity, demonstrating strong commitment to ethical values, and respecting the rule of law; • ensuring openness and comprehensive stakeholder engagement; • defining outcomes in terms of sustainable economic, social, and environmental benefits; • determining the interventions necessary to optimise the achievement of the intended outcomes; • developing the entity’s capacity, including the capability of its leadership and the individuals within it; and • implementing good practices in transparency, reporting, and audit to deliver effective accountability. Strategic Planning 3.3 In considering the delivery of integrated services we attended the MIJB meetings to observe planning, approval, monitoring and review activity of the Midlothian Health and Social Care Integration Joint Board’s business and performance. Risk Management 3.4 We carried out a high level assessment of processes for managing and monitoring risks to determine the effectiveness of arrangements for managing uncertainty over the achievement of the strategic objectives of the MIJB. The Internal Audit review of medium term financial Page 30 of 122
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planning identified a recommendation for the IJB Risk Register to include a specific risk in relation to the Board’s financial challenges in the years ahead. Financial Management 3.5 A specific review of medium term financial planning was undertaken in 2022/23, this was completed in partnership with NHS Lothian internal audit team resource. We reviewed the effectiveness of processes associated with the financial planning of the resources delegated to the partnership and the monitoring and reporting of financial activities in a transparent manner in accordance with best accounting practice. We reviewed the 2022/23 budgets and monitoring reports in place to enable service delivery within approved budget. The findings from the review of Medium term financial planning have been summarised in section 2.5 and the recommendations agreed are detailed in section 6.1 below. Annual Audit Work 3.6 Furthermore Midlothian Council’s Internal Audit resources were also deployed in undertaking the following annual audit work for the MIJB during the year: • Recommendations Follow-Up Review (Undertake two reviews. Refer to Section 5 below). • Administration of Audit Scotland Reports (Monitor publication of Audit Scotland reports and co-ordinate submission by Management of relevant Audit Scotland Reports to the MIJB Audit and Risk Committee / Board). • Audit Committee Self-Assessment (Development of templates that will assist the Chair in undertaking a self-assessment of the MIJB Audit and Risk Committee against the 2022 revised CIPFA best practice guidance and in implementing any areas of improvement in support of their development). • Attendance at Board / Committee meetings (Prepare for and attend MIJB Board / Audit and Risk Committee meetings and assisting in arranging the MIJB Board Self-evaluation). • Planning for 2023/24 (Update Audit Universe, develop and consult on coverage within the MIJB Internal Audit Annual Plan 2023/24). 3.7 For assurance purposes, the MIJB Audit and Risk Committee was made aware of reports by other bodies that relate to the business of the MIJB including those by the Partners’ Internal Auditors, Audit Scotland and other national scrutiny and audit bodies. Page 31 of 122
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4 Summary Findings and Conclusions arising from Delivery of the Internal Audit Annual Plan 2021/22 4.1 Local Code of Corporate Governance 4.1.1 The Integration Joint Board is a legal entity in its own right and as a public body it should operate under public sector good practice governance arrangements which are proportionate to its transactions and responsibilities. 4.1.2 A Local Code of Corporate Governance and Standing Orders have been approved by the Board. These documents encapsulate the public sector good practice principles and by following them the Board demonstrates sound governance arrangements. 4.1.3 We conducted a high level review of the MIJB’s updated Local Code of Corporate Governance and consider that the Governance arrangements are generally sound, although there is scope for improvement in compliance with some parts of the CIPFA/SOLACE Framework as set out in section 5 below. 4.1.4 During the year, the Board and NHS Lothian Approved the integration scheme in June 2022. 4.1.5 The IJB has taken steps to improve governance arrangements in a number of areas: • A Code of Conduct for Members and an Induction Handbook for new Members were approved in April 2022; and • A Self-evaluation review of the IJB Board was planned, and then completed in May 2023. 4.1.6 We have made no recommendations in respect of the corporate governance arrangements of the Integration Joint Board in this report. Governance and transparency is concerned with the effectiveness of scrutiny and governance arrangements, leadership and decision making, and transparent reporting of financial and performance information. Conclusion: Governance arrangements in place are generally sound and are being further developed. The Internal Audit high level review of the Local Code of Corporate Governance has identified aspects of governance arrangements where some improvement is required, as set out in Internal Audit recommendations made in previous years or the current year. Page 32 of 122
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4.2 Internal Control and Governance – Strategic Planning 4.2.1 Our attendance at virtual Board meetings and review of the Minutes of meetings which we did not attend continues to indicate that strong strategic leadership is in place and that the Health and Social Care partners are working together in a constructive way. 4.2.2 During the year, a Strategic Plan 2022-2025 has been developed and approved by the IJB in April 2022, which sets out the new vision and values for the IJB. Community engagement was at the heart of developing the new Strategic Plan in line with good practice. 4.2.3 Legislation requires that the specification of what action the delivery partners are required to undertake are set out in formal instructions, referred to as Directions. MIJB approved Directions for 2022/23 in June 2022 in accordance with the MIJB Strategic Commissioning Plan 2022-25. The Directions have been reviewed at a high level with a more detailed Internal Audit review of Directions due to be completed as part of the 2023/24 Internal Audit plan. 4.2.4 In common with other Integration Joint Boards, an incremental approach to service change continues to be taken. A significant challenge that all IJBs face is a clear consensus of what a successfully integrated service should look like. This could lead to the development of services that do not fit together as well as they otherwise might have done. 4.2.5 We have made no recommendations in respect of governance arrangements in this report. Action required by Management is clearly identified, understood and ongoing. Delivering integrated services which are effective and efficient requires an agreed formal statement of the MIJB’s vision and intended outcomes and plans as well as exercising strategic leadership to deliver those outcomes. Conclusion: The MIJB is demonstrating strategic leadership by developing and clearly communicating its purpose and vision and its intended outcomes for service users. The vision, strategic objectives and outcomes are reflected in the Strategic Plan 2022-2025. The MIJB is making continued progress towards delivering integrated Health and Social Care services but has more to achieve. Page 33 of 122
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4.3 Risk Management 4.3.1 Risk management is an important and integral part of good governance and a system of internal controls. It is crucial that risks to the achievement of outcomes are identified and managed. 4.3.2 The MIJB has an approved Risk Management Policy in place which sets out the risk management framework and process, roles and responsibilities, as well as monitoring arrangements. 4.3.3 Risk management is an integral part of all activities and must be considered in all aspects of decision making. The standard template for decision-making reports to the MIJB and its Committees includes a section on implications covering risk. When taking a longer-term view with regard to decision making, risks associated with the potential conflicts between the MIJB’s intended outcomes and short-term to medium term financial constraints are not particularly well expressed. 4.3.4 The MIJB needs to gain assurance on risks associated with delivering services through the partners. Midlothian has recognised that the risks facing the MIJB are those which relates to the MIJB’s own business. Operational risks facing the partners are the concern of the partners except and until a partner risk becomes so significant that it would impact upon the MIJB’s Strategic Plan. Implicitly this is recognised in the Risk Management Policy in that the partners should regularly bring the relevant risks to the attention of the MIJB. 4.3.5 The MIJB maintains a risk register which is reviewed regularly by the relevant risk owners, scrutinised by the MIJB Audit and Risk Committee at its quarterly meetings and reported every quarter to the Board to ensure that the MIJB is kept informed of its key risks and the actions undertaken to manage these risks. The risk register is comprehensive and responsibilities for managing individual risks are clearly allocated although the emerging risk in relation to the future financial challenges facing MIJB requires to be added to the risk register. 4.3.6 We have made no recommendations in respect of risk management arrangements in this report. Risk management is a process of identifying potential risks to the achievement of objectives in advance, analysing them and taking precautionary steps in order to mitigate those risks, thus managing the effect of uncertainty on objectives. Conclusion: Effective risk management processes are in place. There is an opportunity to assess the content of the MIJB Risk Register against the Strategic Plan 2022-2025 that has been developed and approved to ensure the MIJB Risk Register reflects the strategic risks facing the MIJB against the achievement of objectives and priorities set out in the Strategic Plan although improvements in reflecting the potential future financial constraints could now be made. Page 34 of 122
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4.4 Financial Management 4.4.1 Appropriate medium term financial planning arrangements had been put in place in December 2022 with the presentation of the medium term financial plan to the Board, although improvement is required to develop the explicit link to the 2022-2025 strategic plan. Projections in February 2023 highlighted a £4.3million financial gap. In March 2023 further movement regarding prescribing expenditure and the reduction of £1.3m by Midlothian Council to the IJB budget moved the IJB’s projected gap for 2023/24 to £6m before any recovery action. Financial recovery plans of £4.7million were already agreed and financial recovery plans for the remaining gap have been developed and presented to the Board. The additional recovery plans have not (at the time of completion of this report) been formally approved by the Board. Further work is required to ensure that sustainable financial plans remain in place and clarity on the appropriate governance reporting against recovery plans finalised. 4.4.2 The IJB’s budget setting amounts to agreeing the budget offers from the Partners, then allocates the equivalent annual budget to the Partners. Partner budget offers for 2022/23 were agreed in March 2022. In March 2023, the IJB agreed the recommendation not to accept the IJB budget offer from Midlothian Council for 2023/24 as it was not in line with the parameters set by Scottish Government. Further ongoing work to develop a balanced budget has been undertaken and a financial recovery options report is being presented to the June 2023 IJB requesting agreement to which recovery actions should be progressed by officers to support the subsequent funding gap. 4.4.3 During the year, the Board has received financial updates on the expected outturn for the year on an appropriate format and improved basis from the previous year. 4.4.4 At the December 2021 meeting, the Audit and Risk Committee agreed to recommend to the Board the adoption of the CIPFA Financial Management Code, in so far as it applies to the operation of the IJB subject to a further report regarding how the FM Code would apply to the IJB and how assurance would be sought on it. In March 2022, it received a report which concluded that “some standards do not apply to the IJB and, of the rest, the IJB is delivering against them. That said, this analysis highlights that the development of the multi-year, balanced, financial plan is critical.” 4.4.5 We reviewed the extent that the CIPFA Financial Management Code applies to the IJB, evidence suggests that the IJB fully complies with the code other than areas around demonstrating clarity on financial sustainability for the future and reliance on partners for value for money appraisals, which requires further ongoing work. The areas of the CIPFA FM code considered only partially compliant are: Part E: (The financial management style of the authority supports financial sustainability); Part F: (The authority has carried out a credible and transparent financial resilience assessment); Part G: (The authority understands its prospects for financial sustainability in the longer term and has reported this clearly to members); Part I: (The authority has a rolling multi-year medium-term financial plan consistent with sustainable service plans); A strong system of financial management is essential for the successful implementation of policies and the achievement of intended outcomes, as it will enforce financial discipline, strategic allocation of resources, efficient service delivery, and accountability. Page 35 of 122
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Part L: (The budget report includes a statement by the chief finance officer on the robustness of the estimates and a statement on the adequacy of the proposed financial reserves); Part M: (The authority uses an appropriate documented option appraisal methodology to demonstrate the value for money of its decisions); and Part N: (The leadership team takes action using reports enabling it to identify and correct emerging risks to its budget strategy and financial sustainability). 4.4.8 We have made no recommendations in respect of financial management arrangements in this report, although relevant recommendations were included in the Internal Audit Medium Term Financial Planning review. 5 Recommendations Follow-Up Reviews 5.1 The Internal Audit Follow-up of Recommendations Report was presented to the MIJB Audit and Risk Committee in December 2022. This showed good progress with the completion of recommendations with evidence of improved internal controls and governance, and reduced risk - only 3 recommendations remained outstanding at this point and 2 relating to the Medium Term Financial Plan have been closed. Conclusion: An appropriate medium term financial plan was presented to the Board in December 2022, however budget pressures and the requirement for recovery plans to be developed result in further work being required to demonstrate financial sustainability moving forward. The budgetary monitoring process has been appropriate during the year providing the Board with sufficient information to allow for effective budget monitoring. Whilst the IJB does comply with the CIPFA Financial Management Code in most areas, there are a number of areas where full compliance will require further development of financially sustainable plans moving forward. Page 36 of 122
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6 Recommendations and actions arising from Internal Audit Annual Plan 2022/23 6.1 Recommendations in reports are suggested changes to existing procedures or processes. The rating of each recommendation reflects our risk assessment of non-implementation, being the product of the likelihood of the risk materialising and its impact. The ratings are: Ratings for Recommendations High – Arising from a finding which leaves the MIJB open to a very high risk of not achieving its strategic objectives, and where the risk is sufficiently significant to require immediate action within one month of formally raising the issue. Medium – Arising from a finding which leaves the MIJB open to significant risk of not achieving its strategic objectives requiring reasonably urgent action within three months of formally raising the issue. Low – Arising from a finding which leaves the MIJB open to moderate risk of not achieving its strategic objectives requiring action within six months of formally raising the issue to improve efficiency, effectiveness and economy of operations. Recommendation Rating Agreed Management actions Responsibility and timescale 1 The Chief Finance Officer should develop a documented financial planning process that records in an agreed template the timeline and critical steps required for the prompt development of the Medium-term Financial Plan for the IJB. This should be shared with the Board and Partners for information. Low Agree, a process for the IJB medium term financial plan will be developed. December 2023 2 The Medium-term Financial Plan should be developed to include a more explicit link to the Midlothian IJB Strategic Plan and its priorities for the years ahead. This should also include the Board’s strategic priorities in a local and national context, alongside the financial risks associated with the plan’s assumptions. Medium Agree, we will continue to refine the IJBs medium term financial plan and ensure to develop linkages to the strategic plan of the IJB. December 2024 3 The Chief Finance Officer and Chief Officer of the IJB should ensure that the responsibility for the ongoing monitoring of financial recovery plan performance is reported to the Board and a schedule of reporting produced to support this. Medium Agree, the routine finance report to the IJB will include updates on financial recovery plans performance. We will also look to develop more detailed reporting of recovery plans through Performance Assurance & Governance. August 2023 Page 37 of 122
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Recommendation Rating Agreed Management actions Responsibility and timescale 4 The Risk Register for the IJB should be developed further to include an additional risk specific to the Board’s financial challenge and its inability to achieve financial balance for the years ahead. The risk should be scored appropriately considering the criticality of the risk and the impact on the delivery of the Board’s strategic priorities. Medium Agree, this will be undertaken through the normal quarterly risk register updates and will ensure to reflect the reduced budget offer from Midlothian Council and the challenge this has posed for the IJB. September 2023 7 Public Sector Internal Audit Standards (PSIAS) 7.1 The 2022-23 self-assessment of practices against the professional standards PSIAS (2017) has indicated that Midlothian Council’s Internal Audit function ‘Fully Conforms’ with the requirements within the 13 Assessment Areas of the Definition of Internal Auditing, the Code of Ethics, the Attribute Standards and the Performance Standards. Duncan Stainbank Bsc (Hons) CPFA MIJB Chief Internal Auditor 19 June 2023 Page 38 of 122
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Partners’ Internal Audit Assurance 2022/23 Appendix 2 Below is the list of Internal Audit reports by partners’ Internal Audit providers (MLC Internal Audit for Midlothian Council; NHS Lothian Internal Audit for NHS Lothian) that have been presented to their respective Audit Committees within the second half year 2022/23 which are relevant to MIJB for assurance purposes, with a summary of assurances contained therein. Partner Committee Audit Title Audit Objective Internal Audit Summary Findings and Conclusions Midlothian Council Audit Committee 6 December 2022 (Source: Midlothian Council website Committee meetings) Freedom of Information and Environmental Information Regulation Requests To review the controls in place to ensure Freedom of Information (FOI) and Environmental Information Regulation (EIR) requests are dealt with adequately and in a timely manner. This included a review of the implementation of the new customer services platform for the FOI and EIR module Substantial assurance in relation to governance, system, procedures and training, and Limited assurance in relation to for response times, authorisation and appeals. The Council was under Stage 1 Monitoring by the SIC due to the number of FOIs and EIRs responded to late or not responded to exceeding 20% over the past two years. The percentage of FOI and EIRs responded to late or not responded to in the required timescale was 26.7% for Q1 2022/23 (it was noted that Health and Social Care did not have any late responses). The changes introduced by management and the replacement FOI/EIR system will provide improved visibility over areas where there are bottlenecks once the reporting tool is in place. Two medium recommendations and two low recommendations were made to improve the control processes. Midlothian Council Audit Committee 7 February 2023 (Source: Midlothian Council website Committee meetings) Accounts Receivable – Sundry Debt; To review the controls in place to set fees and charges for services, raise invoices promptly, and collect debts efficiently resulting in debtors' balances that are complete, accurate and recoverable with appropriate VAT treatment. The level of assurance provided was substantial for the accounts receivable system. Accounts receivable processes have improved in terms of consistency, audit trail, and internal control over the years, and a significant part of the improvement is due to the Sundry Debt Team and the internal procedures developed by them. One Medium and three low graded recommendations were made as part of the review. Page 39 of 122
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Partner Committee Audit Title Audit Objective Internal Audit Summary Findings and Conclusions Utilities: Energy and Water Consumption To review the controls over the consumption of utilities (energy and water) ensuring utilisation is adequately controlled and represents value for money. The level of assurance provided was Substantial for the procurement arrangements, invoicing and third party usage. Assurance is Limited for usage monitoring and the medium to long- term plans to reduce usage. Five Medium and eight low graded recommendations were made as part of the review. Midlothian Council Audit Committee 7 March 2023 (Source: Midlothian Council website Committee meetings) Performance Management and Performance Indicators To test a sample of performance indicators to ensure that they are complete, accurate, based on current data and conform to the stipulated criteria. It included a follow up of the implementation of the recommendations from the audit of Performance Management (LGBF) – Improvement Service Return undertaken in 2021. Internal Audit considers that the level of assurance is: substantial in relation to the reporting of PIs but is limited for the implementation of the recommendations from the audit of Performance Management (LGBF) undertaken in 2021. 2 recommendations were made during this review and they have only been partially completed. Internal Audit Charter To define the purpose, authority and responsibility of the Internal Audit activity, consistent with the Definition of Internal Auditing, the Code of Ethics and the Standards in the PSIAS. The Internal Audit Charter has been updated in conformance with the PSIAS for approval to ensure that Internal Audit is tasked to carry out its role in accordance with best practice. NB The Internal Audit Charter is applicable to the work carried out for MIJB by the Midlothian Council Internal Audit function. Internal Audit Strategy and Annual Plan 2023/24 To set out the Chief Audit Executive’s strategy for discharging the Internal Audit role and providing the statutory annual assurance opinions, and propose the planned programme of Internal Audit work for the year. The Internal Audit Strategy to meet the Internal Audit Charter and the proposed Internal Audit Annual Plan 2023/24 that sets out the range and breadth of audit areas and sufficient work to enable the CAE to prepare Internal Audit annual opinions. Key components of the audit planning process include a clear understanding of the functions, associated risks, and assurance framework. NB The Internal Audit Strategy is applicable to the work carried out for MIJB by the Midlothian Council Internal Audit function, associated with the MIJB Internal Audit Annual Plan 2023/24. Page 40 of 122
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Partner Committee Audit Title Audit Objective Internal Audit Summary Findings and Conclusions NHS Lothian Audit and Risk Committee 8 February 2023 (Source: NHS Lothian website Key Documents > Audits) Information Security To review of supporting documentation and inventory and asset logs to validate the design and operation of the relevant controls in place. Applying aspects of the NCSC’s 10 Steps to Cyber and reviewed arrangements to meet compliance with this framework and controls in relation to cyber security, to: Obtain understanding of the key areas outlined in scope above, through discussions with key personnel, review of management information and walkthrough test, where appropriate. •Identify the key risks relevant within Information Security. •Evaluate the design of the controls in place to address the key risks. •Test the operating effectiveness of the controls in place. The review received Moderate Assurance. They concluded that the controls in place in respect of NHS Lothian’s Information security provides a Moderate level of assurance. Highlighting 4 medium recommendations in the following areas: • Asset Management – Unsupported/End of Life Assets; • 2 Recommendations in Access Controls; • User Engagement – Managing Human Risk. The MIJB Chief Internal Auditor has taken account of these assurances from partners’ Internal Audit providers to provide the statutory Internal Audit assurance to the MIJB. Page 41 of 122
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Midlothian Integration Joint Board Audit and Risk Committee Midlothian IJB Draft Unaudited Annual Accounts 2022/23 28th June 2023 Item number: 5.3 Executive summary This report presents the IJB’s draft (unaudited) Annual Accounts for 2022/23. The IJB is required to prepare a set of annual accounts each year a draft of these accounts must be agreed by committee before 30 June whereupon the draft must be published on the IJB’s website and presented to the IJB’s auditors for review. Committee members are asked to: 1. Consider the IJB’s draft annual accounts 2. Agree to the publication of these unaudited accounts and presenting them for audit Page 43 of 122
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Midlothian Integration Joint Board Page 2 Report 1. Purpose 1.1 This report presents the IJB’s draft (unaudited) Annual Accounts for 2022/23 2. Recommendations 2.1 Committee members are asked to • Consider the IJB’s draft annual accounts • Agree to the publication of these unaudited accounts and presenting them for audit 3. Background and main report 3.1 The IJB is constituted under section 106 of the local government (Scotland) Act and as such must prepare a set of annual accounts. These accounts must be presented in draft for approval to either the IJB or a committee of governance of the IJB by 30th June whereupon the accounts will be presented for audit by the IJB’s auditors. 3.2 The annual accounts contain a range of sections but breakdown into three main areas :- • The Management Commentary. This provides a statement of the IJB’s purpose and its performance against that purpose in the financial year along with a reflection on the challenges facing the IJB in the next financial year. • The Annual Governance Statement – which reflect on the governance of the IJB and notes any governance improvements identified by the CIA’s Internal Audit Annual Assurance Report • A range of financial statements showing the financial position of the IJB. 3.2 The Audit and Risk Committee is asked to approve the attached draft annual accounts reflecting on the Management Commentary, the Annual Governance Statement and the financial position 4. Policy Implications 4.1 The framework focuses on supporting the implementation of the Public Bodies (Joint Working) (Scotland) Act 2014. Page 44 of 122
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Midlothian Integration Joint Board Page 3 5. Equalities Implications 5.1 There are no equalities implications arising from this report 6. Resource Implications 6.1 There are no resource implications arising from this report. 7 Risks 7.1 There are no risks associated. 8 Involving People 8.1 There are no direct implications for involving people as a result of this report. 9 Background Papers 9.2 None AUTHOR’S NAME Claire Flanagan DESIGNATION Chief Finance Officer CONTACT INFO Claire.flanagan@nhslothian.scot.nhs.uk DATE June 2023 Appendix 1 – Midlothian IJB unaudited annual accounts 2022/23 Page 45 of 122
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1 Midlothian Integration Joint Board (IJB) Unaudited Annual Accounts 2022/23 The Annual Accounts of Midlothian Integration Joint Board for the period from 1 April 2022 to 31 March 2023, prepared pursuant to Section 105 of the Local Government (Scotland) Act 1973 and in accordance with the terms of the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2022/23. Page 47 of 122
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2 Contents Audit Arrangements ............................................................................................... 3 Management Commentary ..................................................................................... 4 Plans for Next Year and beyond ............................................................................ 12 The IJB’s Financial Position: 31 March 2023 ............................................................ 14 Statement of Responsibilities ................................................................................ 21 Remuneration Report ........................................................................................... 23 Annual Governance Statement 2022/23 ................................................................. 26 Independent Auditor’s Report ............................................................................... 31 Comprehensive Income and Expenditure Statement ................................................ 32 Movement in Reserves Statement ......................................................................... 33 Balance Sheet ..................................................................................................... 34 Notes to the Financial Statements ......................................................................... 35 Page 48 of 122
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3 Audit Arrangements Under arrangements approved by the Accounts Commission of Local Authority Accounts in Scotland, the auditor with responsibility for the audit of the accounts of Midlothian Integration Joint Board for the period 1 April 2022 to 31 March 2023 is Audit Scotland, 102 West Port, Edinburgh EH3 9DN. Page 49 of 122
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4 Management Commentary Introduction The management commentary considers the work that the IJB has undertaken during the financial year 2022/23, and then describes the financial performance for the financial year ended 31 March 2023. It provides an overview of the key messages relating to the role, remit, members, objectives, and the strategy of the Midlothian Integration Joint Board (IJB). The IJB’s Operations for the Year 2022/23 The Role and Remit of the IJB The IJB is an Integration Authority set up under the Public Bodies (Joint Working) Act (2014). It is a ‘body corporate’, that is a separate legal entity. The IJB is constituted through its Integration Scheme which was prepared by Midlothian Council and NHS Lothian and presented to Scottish Ministers in March 2015. The Integration Scheme was approved by the Scottish Parliament in June 2015 and the first meeting of the IJB took place on 20 August 2015. A review of the integration scheme was undertaken during 2022 and approved by Midlothian Council and NHS Lothian in June 2022. The scheme is currently awaiting Scottish Parliament approval. The IJB’s role and responsibility is to plan for the delivery of the functions that have been delegated to the IJB by Midlothian Council and NHS Lothian. These functions are - • Adult Social Care • Primary Care Services (GP Practices, Community Dentists, Community Pharmacies and Community Opticians) • Mental Health Services • Physical and Learning Disabilities Services • Community Health Services • Community Hospital Services • Unscheduled Care Services (services that are generally delivered from the Royal Infirmary of Edinburgh, the Western General Hospital and St. John’s Hospital). The IJB assumed formal responsibility for these functions in April 2016 including the budgets for the delivery of these functions. The strategic plan of each IJB must be reviewed and approved by the IJB every 3 years. The IJB, during March and April 2022 considered and approved its third Strategic Plan which covers April 2022 to March 2025. Membership of Integration Joint Board The IJB met virtually 8 times in 2022/23 for formal business meetings, there were two virtual workshops. The members of the IJB as of March 2023 were: Page 50 of 122
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5 Member Nominated/Appointed by Role Val de Souza Nominated by NHS Lothian Voting Member, Chair Colin Cassidy Nominated by Midlothian Council Voting Member, Vice Chair and Chair of Audit and Risk Committee Pauline Winchester Nominated by Midlothian Council Voting Member Derek Milligan Nominated by Midlothian Council Voting Member Kelly Parry Nominated by Midlothian Council Voting Member Angus McCann Nominated by NHS Lothian Voting Member Andrew Fleming Nominated by NHS Lothian Voting Member Nadin Akta (currently Peter Knight acting as substitute) Nominated by NHS Lothian Voting Member Morag Barrow Appointed by the IJB Chief Officer Claire Flanagan Appointed by the IJB Chief Finance Officer Joan Tranent Nominated by Midlothian Council Chief Social Worker Fiona Stratton Nominated by NHS Lothian Chief Nurse Johanne Simpson Nominated by NHS Lothian Medical Practitioner Rebecca Green Nominated by NHS Lothian General Practitioner Grace Chalmers Appointed by the IJB MLC Staff Side Representative Hannah Cairns Appointed by the IJB Head Allied Health Professional Miriam Leighton Appointed by the IJB Voluntary Sector Representative Keith Chapman Appointed by the IJB User Representative/Carer Representative Wanda Fairgrieve / Jordan Miller Appointed by the IJB NHS Staff Side Representative Page 51 of 122
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6 COVID-19 During the pandemic, Midlothian, in line with Scottish Government guidance, stepped up a range of services to support the continued system wide response to Covid. The cost projections associated with these services, through the Scottish Government Local Mobilisation Plan (LMP), were reported to the IJB and during the 2020/21 to 2022/23 financial years the associated costs were funded by designated Covid funding. The Scottish Government confirmed the funding would not be available in the 2023/24 financial year. In response, a Covid decommissioning assessment and reprioritisation of funding exercise was undertaken. The result of this exercise has allowed funding streams to be assessed and reprioritised to ensure both clinical and financial sustainability of these services. IJB’s Vision and Objectives The IJB’s vision and objections are laid out in the IJB’s Integration Scheme, and these reflect the national agreed Health and Wellbeing outcomes. These are: 1. People are able to look after and improve their own health and wellbeing and live in good health for longer. 2. People, including those with disabilities or long-term conditions or who are frail are able to live, as far as reasonably practicable, independently and at home or in a homely setting in their community. 3. People who use health and social care services have positive experiences of those services, and have their dignity respected. 4. Health and social care services are centred on helping to maintain or improve the quality of life of people who use those services. 5. Health and social care services contribute to reducing health inequalities. 6. People who provide unpaid care are supported to look after their own health and wellbeing, including to reduce any negative impact of their caring role on their own health and wellbeing. 7. People using health and social care services are safe from harm. 8. People who work in health and social care services feel engaged with the work they do and are supported to continuously improve the information, support, care and treatment they provide. 9. Resources are used effectively and efficiently in the provision of health and social care services. The IJB also contributes to the achievement of the national criminal justice outcomes because the Parties have elected to delegate criminal justice social work. Page 52 of 122
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7 Delivery of the IJB’s current Strategic plan The Strategic Plan is delivered through the IJB’s directions to the partners (Midlothian Council and NHS Lothian) and the IJB considered the delivery of these directions in detail at its April 2022 meeting and approved the directions in June 2022. The IJB’s Strategic Planning Group has met regularly during the financial year to reflect on and develop the IJB’s Strategic Plan and this is discussed further below in the IJB’s plan for future years. The IJB categorises its services into three broad areas: Core Services These are the local Health and Social Care services within Midlothian and are operationally managed by the Health and Social Care Partnership which is a joint arrangement between Midlothian Council and NHS Lothian. Hosted Services These being delegated functions that are operationally managed by other parts of NHS Lothian – for example in-patient mental health services provided at the Royal Edinburgh Hospital in Edinburgh Set Aside Services These being delegated functions operationally managed by NHS Lothian in its Acute Division. Details of all the functions delegated to the IJB by NHS Lothian and Midlothian Council are laid out under the Role of the IJB below. Within each of these areas the following developments have been driven forward during the year. Core Services Primary Care The IJB is ongoing in supporting the delivery of the Primary Care Implementation Plan in the twelve GP Practices within Midlothian. The HSCP and the GP Practices continue to work closely together to deliver an integrated local care service and the work to progress the memorandums of understanding (MOU) between the Scottish Government and the GP Practices is key in delivering the IJB’s Primary Care Strategy. Examples of this are: Pharmacotherapy: Ongoing implementation of the Primary Care Improvement Plan (via the Scottish Government Primary Care Improvement Fund) now delivers access to Pharmacy services for all GP practices in Midlothian. A wide range of pharmacotherapy is provided, dependent on current need in each practice. Page 53 of 122
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8 A Pharmacy Medicines Reconciliation Hub has been established and scaled up to provide access to all practices. In Addition, Pharmacy-led clinics have been established for cardiology, respiratory, and mental health. The aim is to extend the service as more Pharmacists complete their training. Community Treatment and Care (CTAC) Community Treatment and Care Services are now established and embedded in all GP Practices across Midlothian. Additionally, the service has been extended to 7-day cover. This year’s increased investment from the Primary Care Improvement Fund has increased workforce capacity in the team, with all practices now been offered Phlebotomy, and most practices with chronic disease, wound care, and ear irrigation. MSK-APP (First contact physiotherapy) Advanced Practitioner Physiotherapy (APP) service is now fully established across all Midlothian GP Practices. The service has demonstrated a significant impact in reducing GP workload, with 93% of cases requiring no GP input once seen by an APP. Mental Health Mental Health and Resilience service (MHARS) The Mental Health and Resilience Service (MHARS) is a joint collaborative approach between Midlothian HSCP and Penumbra. The service is open to anyone aged 18 to 65 across Midlothian, 7 days a week, 8am-10pm. MHARS has been designed to be a self-referral service which aims to reduce barriers, offer support around an individual’s specific needs and tailor support around what matters most to them. The service offers a single point of access to support adult residents of Midlothian who are experiencing mental health crisis and distress offering an adaptive approach that provides both Distress Brief Intervention (DBI) and intensive home treatment. This allows MHARS to provide a range of person-centred support options that are customised to each person's needs. DBI has been shown to be a highly effective tool for reducing distress for individuals experiencing a mental health crisis providing immediate support to those in crisis, helping them to develop coping strategies and promote long term resilience. The intensive home treatment offers a more specialist mental health assessment for those at higher risk which includes using assertive outreach to provide support in the person’s own home. There has been a positive impact of the new service in Midlothian, and since launching on the 1st of August 2022. Page 54 of 122
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9 Midlothian Medicated Assisted Treatment (MAT) Implementation Plan Scottish Government’s MAT standards aim to ensure safe, effective, acceptable, accessible, and person-centred care by improving access, choice and care for people affected by problematic substance use across Scotland. Midlothian achieved MAT standards 1-5 (which focus on access, choice, and support) and are on target to achieve MAT standards 6-10 by the March 2024 deadline. Justice The Justice Team have continued to deliver a range of interventions that fulfil Midlothian’s statutory requirements throughout the financial year. This has included making progress to implement the national outcomes outlined in the Scottish Government’s Vision for Justice in Scotland. To ensure the provision of early interventions at the Court stage the service continue to liaise with colleagues locally and nationally to offer and provide a range of bail services to people in Midlothian. As evidenced by the updated performance measures Midlothian have made good progress against the performance indicators, this has been supported by close partnership working to ensure that positive outcomes are achieved for service users. Home First Midlothian have had a continued focus on Home First throughout the year, embedding a continuous improvement approach to help balance capacity and demand. Home first encompasses services such as Discharge to Assess, Rapid Response, Community Respiratory Team, Flow Team, and In-reach Social Work. The services work in close collaboration with Midlothian Community Hospital, Highbank, District Nursing, Care at Home, Primary and Secondary Care. The teams have linked closely with the Scottish Government Discharge Without Delay workstream, using the tools available to embed its' principles system wide. This includes training, developing staff and services, embedding new systems and processes, building relationships across the system, collaborating, and having clear points of escalation. Midlothian are now beginning to see the benefits of their sustained efforts, with performance improving. Learning Disabilities Within Learning Disability Services one of the key areas of success has been the promotion of Positive Behaviour Support where integrated working between staff in health and social care and with external care providers has enhanced the support for people with complex needs. In addition, wider planning activities continue to be driven by the aspiration that all Midlothian learning-disabled citizens feel confident to take part in our community life free from fear, harassment, and abuse. The work is supported and implemented by Expert Panels Page 55 of 122
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10 designed to give people with lived experience of a learning disability direct participation as drivers of our work and implementing a series of measures to promote people’s human rights. In 2022/23, the IJB agreed a strategic review of the learning disabilities service, the review is set to be completed in 2023/24 and will involve a review of the full model of care including day services, commissioned services, and transport. Avoiding patient falls Significant scoping work has been undertaken by the Falls Project Team to map the current processes for falls. This has resulted in a comprehensive programme of work with short, medium, and long-term goals to implement a more preventative approach to falls in Midlothian. This work is underway and will be undertaken by a Falls Implementation Team in the next 6-9 months. Given the high personal and financial cost of falls across the health and social care system, it is anticipated this work results in a reduction in falls and a consequential reduction in demand for services and improved outcomes for people living in Midlothian. Self-Management Approach In the last year, the partnership has tested, developed, and scaled -up a variety of early intervention and self-management approaches for people living with a range of long-term conditions including: • The approach to Long-Covid which is a digital pathway that has been developed in collaboration with partners in NHS Lothian, Chest Heart and Stroke Scotland (CHSS) and POGO Healthcare. • The approach to the management of Chronic obstructive pulmonary disease (COPD) which has been tested and there has been a scale-up of a digital self-management platform in collaboration with NHS Greater Glasgow & Clyde and National Services Scotland; and • The Neurological Pathway which is an early intervention approach in collaboration with the Thistle Wellbeing Service, ArtLink, Cerebral Palsy Scotland and Queen Margaret University. It is anticipated that in 2023/24, the partnership will bring all these approaches together to scope and develop a cohesive approach to all long-term conditions involving a single digital platform embedded within a robust pathway. Hosted Services Dietetics Dietetics is a pan Lothian service hosted by Midlothian HSCP, the service provide both inpatient and community support. During the year there have been several developments: Page 56 of 122
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11 Enteral Feeding – The service explored ways to support the Royal Edinburgh Hospital (REH) wards to manage the dietetic intervention of enteral feeding. The dietetic team have worked with the nursing staff to support training in all aspects of enteral feeding to support the ongoing care of a patient. This has facilitated the right care in the right place for that patient and has meant that an acute hospital admission has been avoided. Community - Prescribing Support Dietitians have worked on the development of information videos to support patients on the use of Food First advice and appropriate use of Oral Nutritional Supplements (ONS) as part of the Dietetics Malnutrition care pathway. Care Home training has also been delivered to support delivery of nutritional care within the care home setting and on appropriate use of ONS in care homes. Inpatient Mental Health The IJB continues to support phase II of the Royal Edinburgh Hospital (REH) business case. The Royal Edinburgh Hospital is an in-patient facility for Mental Health patients in Edinburgh. NHS Lothian have been working on rebuilding this hospital and providing modern fit-for purpose accommodation and services for patients. As part of the overall IJB’s Mental Health Strategy, the IJB has been successful in reducing the in-patient bed usage at the REH and now requires fewer beds than it used previously. Set Aside Services As in previous years, there are significant pressures on the Acute Hospitals which support Midlothian patients (the Royal Infirmary of Edinburgh and the Western General Hospital). During the year, work has been undertaken to review the use of acute beds, identify the drivers influencing the system and reduce attendances at the Emergency Department. In response to the system pressures NHS Lothian’s Unscheduled Care programme board established the Same Day Emergency Care (SDEC) service, following a successful pilot, at the Western General Hospital (WGH). The service is designed to maximise the flow and throughput of patients who can be seen and treated without the need for hospital admission. Using scheduled appointment slots, the care is provided by a combination of Advanced Nurse Practitioner (ANP) and medical staff, supported by Clinical Support Workers (CSW) and admin staff. A full, detailed examination of the work of the IJB in 2022/23 will be published in August 2023 as part of the IJB’s Annual Performance Report. This will be on the IJB’s website; https://www.midlothian.gov.uk/mid-hscp/ Page 57 of 122
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12 IJB’s Financial Performance in 2022/23 For the financial year ending 31st March 2023, the IJB had a deficit of £10,355,000 as reported in the accounting statements on page 14. This position was driven by a significant use of earmarked reserves in 2022/23. This includes £9,703,000 of Covid funding being utilised to offset Covid costs during the year with the unrequired balance being reclaimed by the Scottish Government. The use of these funds is detailed in the analysis of reserves below. The IJB’s financial performance against its in year delegated budgets (excluding earmarked reserves) reported a surplus of £404,000. This is further detailed below in the section describing the IJB’s financial performance in 2022/23. Plans for Next Year and beyond Strategic Commissioning Plan 2022-2025: Year One In June 2022, The IJB published a new Strategic Commissioning Plan for 2022-25. This plan directs on how to manage the available resources and design services that contribute to people in Midlothian living longer and healthier lives. To do this we know we will need to provide more support, treatment, and care for people in their homes, communities, or a homely setting rather than in hospital and work with people as partners in their health and social care. Midlothian IJB looks to ensure services contribute to building a healthier future and continue to meet people’s needs. This will require us to design more service offers and supports that help people take action to prevent ill or worsening health while still provide care, treatment and support when required. The three areas of focus in the Strategic Commissioning Plan for 2022-25 are: • early intervention and prevention, • support and treatment, and • crisis and emergency Our Strategic Aims The Strategic Commissioning Plan for 2022-25 has 6 strategic aims 1. Increase people’s support and opportunities to stay well, prevent ill or worsening health, and plan ahead. 2. Enable more people to get support, treatment and care in community and home- based settings. 3. Increase people’s choice and control over their support and services. 4. Support more people with rehabilitation and recovery. 5. Improve our ability to promote and protect people's human rights, including social and economic rights and meet our duties under human rights law through our services and support. Page 58 of 122
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13 6. Expand our joint working, integration of services, and partnership work with primary care, third sector organisations, providers, unpaid carers, and communities to better meet people’s needs. During the first year of this plan, services have made significant progress in improving how services are planned and delivered, found opportunities to work together in new ways, and strengthened our community connections. Midlothian IJBs Annual Performance Report for 2022/23 will be available on the HSPC website in late August 2023. Directions Directions are the mechanism by which Midlothian IJB sets out the main priorities for the services delegated to the IJB, instructs to NHS Lothian and Midlothian Council on how to approach this, and allocates financial resources. Midlothian IJB has continued to actively improve how progress is measured and recognises the individual and collective contribution made by our partners to see better outcomes for people in Midlothian. A log of Directions was created in 2022/23 to ensure compliance with the Statutory Guidance on Directions from Scottish Government. The log has ensured that all issued Directions continue to be monitored and allowed for more effective reporting of progress. In 2022/23, Midlothian IJB used this log to review progress against the delivery of Directions issued from 2020 and help inform strategic planning. In 2022/23, Midlothian IJB also reviewed how to set Directions for its NHS Lothian and Midlothian Council partners to ensure grip and control around strategic planning, financial allocation, performance monitoring and review of priority actions. This work allowed the Board to reappraise the value of issuing high numbers of operational Directions and resulted in a decision to move towards a more strategic approach for 2023/24. The Planning and Performance Teams conducted a series of workshops with the Officers of the HSCP and Board Members. This process supported the development of a strategic set of Directions that reflected the Boards best hopes for the people and communities of Midlothian, and gave operational services to explore, design, and catalyse the transformation required. A new Midlothian IJB Performance Framework developed in 2022/23 and progress towards Directions continues to be reported to the IJB every six months within this. The Midlothian Performance Framework sits alongside the Midlothian HSCP Performance Framework and brings together the strategic ambitions of the organisation with operational activity captured in the Midlothian HSCP Governance and Assurance Framework. Looking forward, Midlothian IJB Directions for 2023/24 are aligned to the nine National Health and Wellbeing Outcomes and share the overarching strategic vision of the Lothian Strategic Development Framework, the Midlothian Council 5-Year Plan, and the ambitions of the Midlothian Community Planning Partnership. This integrated approach is designed achieve the greatest change in the shortest time possible to improve the outcomes that matter most to people and communities. Directions for 2023/24 were issued on 30th March to the Chief Executives of NHS Lothian and Midlothian Council. Page 59 of 122
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14 The IJB’s Financial Position: 31 March 2023 Summary For the year ending 31 March 2023, the IJB recorded a deficit of £10,355,000. The costs incurred in delivering the IJB’s functions, by Midlothian Council and NHS Lothian, were more than the income that the IJB received from NHS Lothian and Midlothian Council. Income £000’s Expenditure £000’s Variance £000’s Midlothian IJB £172,830 £183,185 (£10,355) This position should be seen in the context of: • The IJB generated a surplus in 2021/22. The surplus was the result of funding being allocated by the Scottish Government during 2021/22 for use in 2022/23. A significant proportion of this equated to the Covid funding allocation. Therefore, the deficit is a result of the IJB incurring expenditure against its earmarked reserve. • The IJB’s financial performance against its “in year” delegated budgets (excluding earmarked reserves) resulted in a surplus of £404,000 within Social Care. • The health budgets of the IJB generated an overspend of £1,480,000 and as a result non-recurring financial support was provided by NHS Lothian to ensure a balanced financial position. Reserves The movement in the IJB’s reserves and the makeup of that reserve is detailed below. Opening Movement Closing £000's £000's £000's Covid £9,703 (£9,703) £0 Other Earmarked £7,939 (£964) £6,975 General £5,870 £312 £6,182 Total £23,512 (£10,355) £13,157 In summary the balance in the IJB’s reserves on 31st March 2023 is £13,157,000. This is made up of £6,975,000 for earmarked reserves and £6,182,000 of general reserves. The IJB no longer holds any COVID reserves. The earmarked reserves are for very specific projects and the IJB will be encouraging the partners to progress these projects, however some elements will support broader work and the IJB is committed to ensuring that the earmarked funds which can be appropriately used to develop the IJB’s services are used in that way. More detail on the earmarked reserves is shared below and within the notes to the accounts. Page 60 of 122
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15 2023/24 Financial Outlook The IJB did not have a balanced budget for 2023/24 at its March and April 2023 meetings. This was due to a reduced budget offer from Partner Midlothian Council, as such the IJB voted to not accept this offer from the Council. The IJB with Midlothian Council are looking at other methods of financial support to the IJB and the IJB is considering options to mitigate the £1,333,000 budget reduction. There are clearly a significant range of financial pressures impacting on the IJB’s partners and the IJB is committed to working with the partners in so far as the Integration Scheme allows. Analysis of the Financial Statements The financial statements are all presented on a net basis. Therefore, budget and expenditure values below include both income and expenditure. Health Social Care Health Social Care Variance Note Budget Budget Expenditure Expenditure £000’s £000’s £000’s £000’s £000’s Direct Midlothian Services Community AHPS 2,234 2,101 133 Community Hospitals 6,206 6,563 (358) District Nursing 6,085 5,858 227 General Medical Services 17,276 17,512 (236) Health Visiting 2,398 2,506 (108) Mental Health 3,031 2,849 182 Other 1,384 1,167 217 1 Prescribing 19,660 20,328 (668) Resource Transfer 7,112 7,109 3 2 Older People 26,304 25,552 752 Learning Disabilities 18,229 18,984 (755) Mental Health 1,134 1,189 (55) Physical Disabilities 3,829 3,847 (18) Assessment & Care Management 3,616 3,583 33 Other 3,499 3,053 446 3 Midlothian Share of Pan Lothian Set Aside 21,495 22,586 (1,091) 4 Mental Health 2,802 3,051 (249) Learning Disabilities 1,338 1,353 (15) GP Out of Hours 1,328 1,397 (69) Rehabilitation 948 783 165 Sexual Health 759 774 (15) Psychology 1,283 1,184 99 Page 61 of 122
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16 Substance Misuse 518 497 21 Allied Health Professions 1,781 1,658 123 Oral Health 1,355 1,305 51 Other 3,826 3,717 109 Dental 6,348 6,348 0 5 Ophthalmology 1,744 1,744 0 5 Pharmacy 3,830 3,830 0 5 Sub Totals 114,738 56,612 116,218 56,208 (1,076) Nonrecurring funding support from NHS Lothian 1,480 1,480 Grand Total 116,218 56,612 116,218 56,208 404 Notes 1. Other includes £4.816m for the Social Care Fund. These are resources which the Scottish Government has directed to the IJB through NHS Lothian and are shown as health; however, these funds are then transferred to the Council and used to support the delivery of social care services. 2. Resource Transfer are funds for specific purposes which are transferred from health to social care. However, these remain part of the health budget and are reported there. 3. Other includes care for non-specific groups, substance misuse services and other management and performance costs. 4. Set Aside are the budgets for those functions delegated to the IJB which are managed by the Acute Services management teams within NHS Lothian. These services are: ▪ Accident and Emergency ▪ Cardiology ▪ Diabetes ▪ Endocrinology ▪ Gastroenterology ▪ General Medicine ▪ Geriatric Medicine ▪ Rehabilitation Medicine ▪ Respiratory Medicine ▪ Various ancillary support services for the above These services are delivered at the Royal Infirmary of Edinburgh, the Western General Hospital and St. John’s Hospital. 5. In the Health system, expenditure to support the delivery of community dentistry, community opticians and community pharmacists is termed as ‘noncash limited’ (NCL) but is clearly part of the delivery of primary care services and these functions are delegated to the IJB. However, being NCL there is no budget as such, but any expenditure incurred is supported in its entirety by the Scottish Government. The NCL values are not part of the budget setting process, there being no budget, but NHS Lothian has matched the NCL expenditure with income to cover this expenditure. Page 62 of 122
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17 The charges (shown as expenditure above) made by Midlothian Council to the IJB are the net direct costs incurred in the delivery of social care services in Midlothian. The charges from NHS Lothian are based on the health budget setting model as agreed by the IJB. That is, charges for the core services (those services specifically for and delivered by the Midlothian partnership) are based on the net direct actual costs incurred in Midlothian. However, charges for hosted and set aside services (those services which are not generally managed by the Midlothian Partnership and are delivered on a pan-Lothian basis) are based on the total actual costs for these service shared across four IJBs per the budget setting model. The IJB share of the total actual costs incurred in 2022/23 for hosted services is 10% and, generally, 10% of the Lothian element of the set aside budgets and the non-cash limited budgets. Reserves The IJB has reserves at the end of 2022/23 of £13,157,000, compared to reserves of £23,512,000 in March 2022. The movement can be described as follows: Opening Balance Movement Closing Balance £000’s £000’s £000’s Earmarked Reserves COVID-19 Funding 9,703 (9,703) 0 Local Programmes 2,274 (1,663) 611 Primary Care Investment Fund 889 (677) 212 Alcohol and Drug Strategy 619 (529) 90 Community Support Fund 312 (3) 309 Technology Enabled Care 208 124 332 Integrated Care Fund 399 7 406 Wellbeing Service 248 42 290 Action 15 140 (100) 40 Unscheduled Care 0 1,313 1,313 Mental Health Recovery & Renewal 0 242 242 Unpaid Carers PPE 0 2 2 EGIERDA Project 49 0 49 Autism Strategy 12 0 12 Interim Care 603 (145) 458 Care at Home 934 91 1,025 Multi-disciplinary Teams 302 (302) 0 Older People's Transformation Board 22 0 22 Carers Act 679 558 1,237 Equally Safe Fund 29 (14) 15 Trauma Informed Practice 50 40 90 Additional MHO Capacity 80 0 80 DBI/Penumbra Funding 90 50 140 Total Earmarked Reserves 17,642 (10,667) 6,975 General/Contingency Reserve 5,870 312 6,182 Total Reserves 23,512 (10,355) 13,157 Page 63 of 122
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18 It should be noted that of the total reserve of £13,157,000 at the end of the 2022/23 financial year, these earmarked funds should be expended in 2023/24 and will not be available to the IJB for any other purpose. Key risks, challenges, and uncertainties The three main pressures faced by Midlothian are: • The growing demand for services, both locally and in Acute sites, driven by population growth and the changing needs of the population. • the lack of available workforce; and • the challenging financial landscape. Health and Social Care will regularly update the IJB with detailed transformations plans on reshaping services to meet the needs of the population. The challenge for the IJB is to transform the delivery of its delegated functions to ensure both clinical and financial sustainability. A growing and ageing population Midlothian’s population is one of the fast growing in Scotland, this was evidenced by the population estimates released by the National Records of Scotland (NRS). The published findings projected that between 2018 and 2028, the population of Midlothian is to increase from 91,340 to 103,945. This is an increase of 13.8%, which compares to a projected increase of 1.8% for Scotland as a whole. Midlothian is projected to have the highest percentage change in population size out of the 32 council areas in Scotland. The average age of the population of Midlothian is projected to increase. The 75 and over age group is projected to see the largest percentage increase (+40.9%). As people live longer many more people will be living at home with frailty and/or dementia and/or multiple health conditions. This will pose challenges for all our health and social care services whilst also changing the face of some of the local communities. Source Information - Link to NRS. Higher rates of long-term conditions Managing long-term conditions is one of the biggest challenges facing health care services worldwide, with approximately 60% of all deaths attributable to them. There are a range of long-term conditions that impact the population of Midlothian, but a particular challenge for Midlothian is the prevalence chronic obstructive pulmonary disease (COPD). The number and prevalence of COPD has been increasing over the last decade. Midlothian ranks 10th highest out of the 31 HSCPs for COPD prevalence, has the highest prevalence rate among the Lothian HSCPs, and a higher prevalence rate than the Scotland average. Page 64 of 122
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19 Workforce pressures Both the NHS and the Local Authority are experiencing a shortage of care professionals. The pressure spans over various disciplines, including medical staff, nurses, allied health professionals, social workers, and carers. The demand for services often exceeds the available workforce, leading to increased workloads and potential strains on the system. Addressing these challenges requires a multifaceted approach, including robust workforce planning, recruitment, and retention strategies. In response, Midlothian is piloting new approaches and has held recruitment days to provide a better understanding of services and promote working in Midlothian. Acute hospitals The Acute hospitals that support the population of Midlothian (The Royal Infirmary of Edinburgh and the Western General Hospital) remain under significant demand pressures as do other social care and health services, in a financially challenging environment. The IJB will continue to support community-based alternatives that will minimise avoidable admissions and facilitate discharges to help improve system flow. The challenging financial landscape The Scottish Government, in setting its budget, highlighted that there is significant financial challenge ahead with limited resources available. The challenge impacts across the whole of the Public Sector and the IJB understands the pressures faced by NHS Lothian and Midlothian Council with increasing costs and constrained funding. The IJB must ensure its own financial sustainability, reported through the IJB’s medium term financial plan. The plan shows signification financial gaps therefore a focus will need to be put on financial recovery to ensure the sustainability of services – tough decisions, service redesign and transformation will be critical. Mitigation and management of the risks, challenges, and uncertainties Midlothian will continue to pursue innovative solutions to mitigate risk and maximise the opportunities available. Midlothian will manage this through its risk management system, it’s Directions and the Strategic Plan. As stated, the population is increasing however the Scottish Government’s distribution model of resource allocation to both Councils and the NHS does take account of changes in population. There is a lag between the distribution model changing and the movement in population, but this is not a new issue and both Midlothian Council and NHS Lothian continue to escalate this issue. The other uncertainties have been and will continue to be managed through the IJB’s Strategic Plan (and the supporting Medium Term Financial Plan) and the IJB’s Strategic Planning Group discusses and develops transformational change and new integrated models of delivery of both social and health care. Page 65 of 122
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20 Val de Souza, IJB Chair. Date: Morag Barrow, Chief Officer. Date: Claire Flanagan, Chief Finance Officer. Date: Page 66 of 122
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21 Statement of Responsibilities Responsibilities of the Integration Joint Board The Integration Joint Board is required to: • Make arrangements for the proper administration of its financial affairs and to secure that the proper officer of the board has responsibility for the administration of those affairs (section 95 of the Local Government (Scotland) Act 1973). In this authority, that officer is the chief finance officer • Manage its affairs to secure economic, efficient, and effective use of resources and safeguard its assets • Ensure the Annual Accounts are prepared in accordance with legislation (The Local Authority Accounts (Scotland) Regulations 2014), and so far, as is compatible with that legislation, in accordance with proper accounting practices (section 12 of the Local Government in Scotland Act 2003) • Approve the Annual Accounts I confirm that these Annual Accounts were approved for signature at a meeting of the Audit & Risk Committee. Signed on behalf of Midlothian Integration Joint Board. Val de Souza, IJB Chair. Date: Page 67 of 122
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22 Responsibilities of the Chief Finance Officer The chief finance officer is responsible for the preparation of the IJB’s Annual Accounts in accordance with proper practices as required by legislation and as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (the Accounting Code). In preparing the Annual Accounts, the chief finance officer has: - • Selected suitable accounting policies and then applied them consistently • Made judgements and estimates that were reasonable and prudent • Complied with legislation • Complied with the local authority Code (in so far as it is compatible with legislation) The chief finance officer has also: - • Kept proper accounting records which were up to date • Taken reasonable steps for the prevention and detection of fraud and other irregularities. I certify that the financial statements give a true and fair view of the financial position of the Midlothian Integration Joint Board as at 31 March 2023 and the transactions for the year then ended. Claire Flanagan, Chief Finance Officer Date: Page 68 of 122
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23 Remuneration Report Introduction This Remuneration Report is provided in accordance with the Local Authority Accounts (Scotland) Regulations 2014. It discloses information relating to the remuneration and pension benefits of specified IJB members and staff. The information in the tables below is subject to external audit. The other sections of this report will be reviewed by Audit Scotland and any apparent material inconsistencies with the audited financial statements will be considered as part of their audit report. Remuneration: IJB Chair and Vice Chair The voting members of the IJB are appointed through nomination by Midlothian Council and NHS Lothian Board. Nomination of the IJB Chair and Vice Chair post holders alternates between a Councillor and a Health Board representative. The IJB does not provide any additional remuneration to the Chair, Vice Chair or any other board members relating to their role on the IJB. The IJB does not reimburse the relevant partner organisations for any voting board member costs borne by the partner. Neither the Chair nor the Vice Chair appointments had any taxable expenses paid by the IJB in 2022/23 (PY: nil). The IJB does not have responsibilities, either in the current year or in future years, for funding any pension entitlements of voting IJB members. Therefore, no pension rights disclosures are provided for the Chair or Vice Chair. NHS Lothian remunerates its non-executive members on a notional day basis. Those non- executive members of the NHS Lothian Board who are also Chairs or Vice Chairs of IJBs are given an additional notional day’s remuneration in recognition of the additional time required to undertake those roles. This remuneration is £9,030 per annum (PY £8,842). Val de Souza took the Chair of the IJB from 01 September 2022, replacing Carolyn Hirst who was the Chair of the IJB until 31 August 2022. Remuneration: Officers of the IJB The IJB does not directly employ any staff; however specific post-holding officers are non- voting members of the Board. Chief Officer Under section 10 of the Public Bodies (Joint Working) (Scotland) Act 2014 a Chief Officer for the IJB has to be appointed and the employing partner has to formally second the officer to the IJB. The employment contract for the Chief Officer will adhere to the legislative and regulatory framework of the employing partner organisation. The remuneration terms of the Chief Officer’s employment are approved by the IJB. Page 69 of 122
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24 The Chief Officer of the IJB is Morag Barrow, who is also the Director of Health and Social Care for Midlothian Council and the Joint Director of the Midlothian Partnership. It has been agreed that 50% of her total remuneration is to be shown in the accounts of the IJB as her remuneration as the Chief Officer of the IJB. Chief Finance Officer Although the costs of the Chief Finance Officer are not included in the charges made to the IJB by either partner, given the S95 role of the Chief Finance Officer and in the interests of transparency, the remuneration of the Chief Finance Officer is included below. The Chief Finance Officer is employed by NHS Lothian and has three roles – the IJB’s Chief Finance Officer, the Chief Finance Officer of East Lothian IJB and an operational role in the NHS Lothian finance team as a Finance Business Partner. On that basis, one third of the total remuneration for Claire Flanagan is shown below. Other Officers No other staff are appointed by the IJB under a similar legal regime. Other non-voting board members who meet the criteria for disclosure are included in the disclosures below. Senior Employees: Salary, Fees & Allowances: Name 2021/22 £ 2022/23 £ Morag Barrow 53,805 52,699 Claire Flanagan (Note 1) 22,640 25,901 David King (Note 2) 14,047 1,436 Note 1: Chief Finance Officer (Claire Flanagan) returned from maternity leave in May 2022, while off her role was fulfilled on an interim basis by David King. Note 2: David King is retired but was paid on the NHS Lothian Staff bank (by NHS Lothian) on an ad hoc basis. David King also undertook the role of CFO in East Lothian IJB but did not undertake any duties as a finance business partner. NHS Lothian have provided the total costs of having employed David King during this time and half of these costs will be shown here (the other half shown in East Lothian IJB). David King is no longer an active member of the SPPA. In respect of officers’ pension benefits the statutory liability for any future contributions to be made rests with the relevant employing partner organisation. On this basis there is no pensions liability reflected on the IJB balance sheet for the Chief Officer or any other Officers. The IJB however has responsibility for funding the employer contributions for the current year in respect of the officer time spent on fulfilling the responsibilities of their role on the IJB. The following table shows the IJB’s funding during the year to support officers’ pension benefits. The tables also shows the total value of accrued pension benefits which may include benefits earned in other employment positions and from each officer’s own contributions. Page 70 of 122
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25 In year Pension Contributions: For Year to 2022 £ For year to 2023 £ Claire Flanagan £5,504 £5,873 Accrued Pension Benefits: Pension (Difference from 31 March 2022) £000’s Lump Sum (Difference from 31 March 2022) £000’s Pension (as at 31 March 2023) £000’s Lump Sum (as at 31 March 2023) £000’s Morag Barrow 21 54 9 19 Claire Flanagan 18 27 21 29 Disclosure by Pay Bands Pay band information is not separately provided as all staff pay information has been disclosed in the information above. Exit Packages The IJB did not support nor did it direct to be supported by its partners, any exit packages during 2022/23 (2021/22: nil). Val de Souza, IJB Chair. Date: Morag Barrow, Chief Officer. Date: Page 71 of 122
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26 Annual Governance Statement 2022/23 Introduction The Annual Governance Statement explains the MIJB’s governance arrangements and system of internal control and reports on their effectiveness. Scope of Responsibility The MIJB is responsible for ensuring that its business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for and used economically, efficiently and effectively. To meet this responsibility, the MIJB has established arrangements for governance which includes a system of internal control. The system is intended to manage risk to support the achievement of the MIJB’s policies, aims and objectives. Reliance is also placed on NHS Lothian and Midlothian Council’s (the partners) systems of internal control that support compliance with both organisations’ policies and promotes achievement of each organisation’s aims and objectives, as well as those of the MIJB. The system can only provide reasonable and not absolute assurance of effectiveness. The Governance Framework and Internal Control System The Board of the MIJB comprises voting members, nominated by either NHS Lothian or Midlothian Council, as well as non-voting members including a Chief Officer appointed by the Board. The current MIJB Local Code of Corporate Governance (MIJB Local Code), which was approved by the Board on 8 April 2021, sets out the framework and key principles, which require to be complied with, to demonstrate effective governance. The MIJB Local Code reflects the changing context of integration and is consistent with the principles and recommendations of the new CIPFA/SOLACE Framework ‘Delivering Good Governance in Local Government’ (2016) and the supporting guidance notes for Scottish authorities. The overall aim of the Framework is to ensure that: resources are directed in accordance with agreed policy and according to priorities; there is sound and inclusive decision making; and there is clear accountability for the use of those resources in order to achieve desired outcomes for service users and communities. The main features of the governance framework and internal control system associated with the seven core principles of good governance defined in the MIJB Local Code in existence during 2022/23 included: A. Behaving with integrity, demonstrating strong commitment to ethical values, and respecting rule of law The roles and responsibilities of Board members and statutory officers and the processes to govern the conduct of the Board’s business are defined in the Scheme of Integration which Page 72 of 122
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27 was approved by the Board and NHS Lothian in June 2022, which serves as the approved constitution, and Standing Orders, a revision of which was approved by the Board in February 2023, to make sure that public business is conducted with fairness and integrity. The Ethical Standards in Public Life (Scotland) Act 2000 provides for Codes of Conduct for local authority councillors and members of relevant public bodies. As a Public Body listed in schedule 3 of the Act, the MIJB is required to produce a Code of Conduct, which was approved by the Board in April 2022. The MIJB is dependent upon arrangements within the partner organisations for areas such as: • ensuring legal compliance in the operation of services; • handling complaints; • ethical awareness training and whistleblowing policies and procedures; • staff appointment and appraisal processes which take account of values and ethical behaviour; • identifying, mitigating and recording conflicts of interest, hospitality and gifts; and • procurement of goods and services which are sustainable, represent value of money and which reinforce ethical values. Other areas where the MIJB places significant reliance on arrangements in place within the partner organisations are set out in the remainder of the statement. The Chief Officer is responsible for ensuring that agreed procedures are followed and that all applicable statutes and regulations are complied with. Professional advice on the discharge of duties is provided to the Board by the MIJB Chief Officer supported by Chief Financial Officer, Chief Internal Auditor and Board Clerk as appropriate. B. Ensuring openness and comprehensive stakeholder engagement Board meetings are held in public unless there are good reasons for not doing so on the grounds of confidentiality. Unless confidential, decisions made by the Board are documented in the public domain. Community engagement was encouraged as part of the development of the Scheme of Integration and the Strategic Plans of the Health and Social Care Integration Joint Board were developed following consultations with interested parties including members of the public. C. Defining outcomes in terms of sustainable economic, social, and environmental benefits The vision, strategic objectives and outcomes are reflected in the Midlothian Health & Social Care Integration Joint Board third Strategic Plan 2022-25 was approved in April 2022 and has been updated to reflect on-going assessment of need and priorities following public consultation. Implementation is underpinned by the associated Directions, on which progress reports are presented to the Board. Page 73 of 122
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28 Implications are considered during the decision making process within the standard report template covering Policy, Equalities, Resources, Risk, and Involving People. D. Determining the interventions necessary to optimise the achievement of the intended outcomes In determining how services and other courses of action should be planned and delivered, the MIJB has a statutory responsibility to involve patients and members of the public. The MIJB Strategic Plan is based on consultation during its review and update. The MIJB has issued Directions to the partners for service delivery and for service redesign and recommissioning in line with the transformation programme. E. Developing the entity’s capacity, including the capability of its leadership and the individuals within it The MIJB Chief Officer is responsible and accountable to the Board for all aspects of management including promoting sound governance and providing quality information/support to inform decision-making and scrutiny. Regular meetings are held between the Chief Officer and the Chair and Vice Chair of the MIJB. The MIJB Chief Officer also meets regularly with representatives from the partner organisations. Members of the MIJB Board are provided with the opportunity to attend Development Sessions relevant to their role as part of their development programme. The MIJB has also undertaken a Self-Assessment in May 2023 with a draft improvement plan being created. A 3 year Workforce Plan 2022-25 has been created, approved and published to help ensure it has the right people, with the right skills, in the right place, at the right time to support the delivery of its strategic objectives and priorities. F. Managing risks & performance through robust internal control & strong public financial management The MIJB Chief Officer has overall responsibility for directing and controlling the partnership to deliver health and social care services. The MIJB Board is responsible for key decision- making. The MIJB has approved a Risk Management Strategy which includes: the reporting structure; types of risks to be reported; risk management framework and process; roles and responsibilities; and monitoring risk management activity and performance. The MIJB Chief Financial Officer is responsible for the proper administration of all aspects of the MIJB’s financial affairs including ensuring advice is given to the Board on all financial matters. The MIJB’s system of internal financial control is dependent upon the framework of financial regulations, regular management information (including Revenue Budget Monitoring reports to the Board), administrative procedures (including segregation of duties), management supervision and systems of delegation and accountability within the partner organisations. The MIJB also relies upon the partners for: Page 74 of 122
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29 • Counter fraud and anti-corruption arrangements; and • Management of data in accordance with applicable legislation. G. Implementing good practices in transparency, reporting, and audit to deliver effective accountability The Shared Chief Internal Auditor of Midlothian Council is the MIJB’s Chief Internal Auditor (which remained unfilled between July 2022 and January 2023) whose role is to provide an independent and objective annual opinion on the effectiveness of the MIJB’s internal controls, risk management and governance. This is carried out in conformance with the Public Sector Internal Audit Standards. The MIJB responds to the findings and recommendations of Internal Audit, External Audit, Scrutiny and Inspection bodies. The MIJB Audit and Risk Committee is integral to overseeing assurance and monitoring improvements in internal controls, risk management and governance. Performance Reports were presented to the Board for monitoring and control of achievement of Local Improvement Goals. An Annual Performance Report for 2022/23 is being prepared to outline progress against strategic objectives over the year. The Annual Accounts and Report for 2022/23 setting out the financial position in accordance with relevant accounting regulations is being prepared. Review of Adequacy and Effectiveness The MIJB is required to conduct an annual review of the effectiveness of its governance framework. The review was informed by: an annual self-assessment carried out by Internal Audit against the MIJB’s Local Code of Corporate Governance; Internal Audit reports for the MIJB; External Audit reports for the MIJB; relevant reports by other external scrutiny bodies and inspection agencies; and relevant partners’ (NHS Lothian and Midlothian Council) Internal Audit and External Audit reports. In respect of the four improvement areas of governance identified by the MIJB in 2021/22, there have been developments during the year all of these. Specifically, the work and consultation undertaken to prepare the updated Strategic Plan 2022-2025 (which was approved by the Board in April 2022), progress of the Performance Management Framework, the development of the Workforce Strategic Plan 2022-2025 by the Workforce Strategic Planning Group to ensure alignment with the updated Strategic Plan and the development of the Medium Term Financial Plan for 2022/23 – 2026-27 in December 2022, further work against this plan is required as highlighted in the continued improvement areas for governance. Improvement Areas of Governance The review activity outlined above has identified the following areas where further improvement in governance arrangements can be made to enhance compliance with the Local Code: Page 75 of 122
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30 1 The Medium term financial plan should be further developed to include a more explicit link to the Midlothian IJB Strategic Plan. 2 Given the significant challenges in developing financial recovery plans of approximately £6million for 2023/24 confirmation of the governance process of monitoring against the achievement of these recovery plans should be agreed following approval of the recovery plans that have now been developed. 3 The Risk Register for the IJB should be developed further to include an additional risk specific to the Board’s financial challenge. The risk should be scored appropriately con- sidering the criticality of the risk and the impact on the delivery of the Board’s strategic priorities. The implementation of these actions to enhance the governance arrangements in 2023/24 will be driven and monitored by the MIJB Chief Officer in order to inform the next annual review. Internal Audit work planned in 2023/24 is designed to test improvements and compliance in governance. Conclusion and Opinion on Assurance It is our opinion that reasonable assurance can be placed upon the adequacy and effectiveness of the MIJB’s governance arrangements and system of internal control, while recognising that further improvements are required to fully demonstrate compliance with the Local Code in order for the MIJB to fully meet its principal objectives. Systems are in place to regularly review and improve governance arrangements and the system of internal control. Val de Souza, IJB Chair. Date: Morag Barrow, Chief Officer. Date: Page 76 of 122
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31 Independent Auditor’s Report Independent auditor’s report to the members of Midlothian Integration Joint Board and the Accounts Commission Page 77 of 122
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32 Comprehensive Income and Expenditure Statement This statement shows the cost of providing services for the year according to accepted accounting practices. Where the impact on the General Fund is amended by statutory adjustments, this is shown in both the Expenditure and Funding Analysis and the Movement in Reserves Statement. IJB Comprehensive Income and Expenditure Statement 2021/22 Net Expenditure £000’s 2022/23 Net Expenditure £000’s Health Care Services - NHS Lothian £121,552 £122,663 Social Care Services - Midlothian Council £46,352 £60,522 Cost of Services £167,904 £183,185 Taxation and Non-Specific Grant Income (£178,423) (£172,830) Surplus on Provision of Services £10,519 (£10,355) The Integration scheme lays out that the partners will provide corporate and other support to the IJB as required and will not charge for these services. These costs are not, therefore, included above. Page 78 of 122
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33 Movement in Reserves Statement The movement in reserves statement shows the value of the IJBs reserve and how this has grown during 2022/23, a large proportion of this reserve is earmarked for future projects and commitments. Movements in Reserves during 2022/23 General Fund Balance £000’s Total Reserves £000’s Opening Balance at 1 April 2022 £23,512 £23,512 Total Comprehensive Income and Expenditure (£10,355) (£10,355) Increase or decrease in 2022/23 (£10,355) (£10,355) Closing Balance at 31 March 2023 £13,157 £13,157 Page 79 of 122
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34 Balance Sheet The Balance Sheet shows the value of the IJB’s assets and liabilities as at the balance sheet date. The net assets (assets less liabilities) of the IJB are matched by the reserves held by the IJB. IJB Balance Sheet 31 March 2022 £000’s 31 March 2023 £000’s Note Current Assets Debtors £23,512 £13,157 7 Creditors: amounts falling due within one year 0 0 8 Total assets less current liabilities £23,512 £13,157 Capital and Reserves Earmarked Reserve £17,642 £6,975 General Reserve £5,870 £6,182 Total Reserves £23,512 £13,157 See Notes 7 and 8 at end of document in Notes to the Financial Statements. Claire Flanagan, Chief Finance Officer. Date: Page 80 of 122
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35 Notes to the Financial Statements 1 Significant Accounting Policies General Principles The Financial Statements summarise the IJB’s transactions for the 2022/23 financial year and its position at the year-end of 31 March 2023. The IJB was established under the requirements of the Public Bodies (Joint Working) (Scotland) Act 2014 and is a Section 106 body as defined in the Local Government (Scotland) Act 1973. The Financial Statements are therefore prepared in compliance with the Code of Practice on Local Authority Accounting in the United Kingdom 2022/23, supported by International Financial Reporting Standards (IFRS), unless legislation or statutory guidance requires different treatment. The accounts are prepared on a going concern basis, which assumes that the IJB will continue in operational existence for the foreseeable future. The historical cost convention has been adopted. Basis of Preparation The IJB financial statements for 2022/23 have been prepared on a going concern basis. The IJB was established under the requirements of the Public Bodies (Joint Working) (Scotland) Act 2014 and is a Section 106 body as defined in the Local Government (Scotland) Act 1973. In accordance with the CIPFA Code of Local Government Accounting (2022/23), the IJB is required to prepare its financial statements on a going concern basis unless informed by the relevant national body of the intention for dissolution without transfer of services or function to another entity. The accounts are prepared on the assumption that the IJB will continue in operational existence for the foreseeable future. The IJB’s funding from and commissioning of services to partners has been confirmed for 2023/24, and a medium-term financial plan has been prepared through to 2026. The Scottish Government allocation has met all costs associated with the pandemic in 2022/23. Therefore, the IJB considers there are no material uncertainties around its going concern status. Accruals of Income and Expenditure Activity is accounted for in the year that it takes place, not simply when settlement in cash occurs. In particular: • Expenditure is recognised when goods or services are received, and their benefits are used by the IJB • Income is recognised when the IJB has a right to the income, for instance by meeting any terms and conditions required to earn the income, and receipt of the income is probable Page 81 of 122
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36 • Where income and expenditure have been recognised but settlement in cash has not taken place, a debtor or creditor is recorded in the Balance Sheet • Where debts may not be received, the balance of debtors is written down Funding The IJB is wholly funded through funding contributions from the statutory funding partners, Midlothian Council and NHS Lothian. Expenditure is incurred in the form of net charges by the partners to the IJB. Cash and Cash Equivalents The IJB does not operate a bank account or hold cash. Transactions are settled on behalf of the IJB by the funding partners. Consequently, the IJB does not present a ‘Cash and Cash Equivalent’ figure on the balance sheet. Debtors and Creditors The funding balance due to or from each funding partner as at 31 March is represented as a debtor or creditor on the IJB’s Balance Sheet. Where income and expenditure have been recognised but settlement in cash has not taken place, a debtor or creditor is recorded in the Balance Sheet. Employee Benefits The IJB does not directly employ staff. Staff are formally employed by the partners who retain the liability for pension benefits payable in the future. The IJB therefore does not present a Pensions Liability on its Balance Sheet. The IJB has a legal responsibility to appoint a Chief Officer. More details on the arrangements are provided in the Remuneration Report. Provisions, Contingent Liabilities and Contingent Assets Provisions are liabilities of uncertain timing or amount. A provision is recognised as a liability on the balance sheet when there is an obligation as at 31 March due to a past event; settlement of the obligation is probable; and a reliable estimate of the amount can be made. Recognition of a provision will result in expenditure being charged to the Comprehensive Income and Expenditure Statement and will normally be a charge to the General Fund. A contingent liability is a possible liability arising from events on or before 31 March, whose existence will only be confirmed by later events. A provision that cannot be reasonably estimated, or where settlement is not probable, is treated as a contingent liability. A contingent liability is not recognised in the IJB’s Balance Sheet but is disclosed in a note where it is material. A contingent asset is a possible asset arising from events on or before 31 March, whose existence will only be confirmed by later events. A contingent asset is not recognised in the IJB’s Balance Sheet but is disclosed in a note only if it is probable to arise and can be reliably measured. The IJB has none of the above. Page 82 of 122
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37 Reserves The IJB’s reserves are classified as either Usable or Unusable Reserves. The IJB’s only Usable Reserve is the General Fund. The balance of the General Fund as at 31 March shows the extent of resources which the IJB can use in later years to support service provision. As noted above, the IJB has reserves of £13,157,000 at 31 March 2023. The IJB’s only Unusable Reserve is the Employee Statutory Adjustment Account. This is required by legislation. IJB’s useable reserve 2022/23 Closing Balance £000’s COVID-19 Funding 0 Local Programmes 611 Primary Care Investment Fund 212 Alcohol and Drug Strategy 90 Community Support Fund 309 Technology Enabled Care 332 Integrated Care Fund 406 Wellbeing Service 290 Action 15 40 Unscheduled Care 1,313 Mental Health Recovery & Renewal 242 Unpaid Carers PPE 2 EGIERDA Project 49 Autism Strategy 12 Interim Care 458 Care at Home 1,025 Multi-disciplinary Teams 0 Older People's Transformation Board 22 Carers Act 1,237 Equally Safe Fund 15 Trauma Informed Practice 90 Additional MHO Capacity 80 DBI/Penumbra Funding 140 General Reserves 6,182 Total 13,157 Indemnity Insurance The IJB has indemnity insurance for costs relating primarily to potential claim liabilities regarding Board member and officer responsibilities. NHS Lothian and Midlothian Council have responsibility for claims in respect of the services that they are statutorily responsible for and that they provide. The IJB holds separate indemnity insurance through its membership of the CNORIS scheme, the charge for this in 2022/23 was £3,000 (PY £3,000). Page 83 of 122
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38 Unlike NHS Boards, the IJB does not have any ‘shared risk’ exposure from participation in CNORIS. The IJB participation in the CNORIS scheme is therefore analogous to normal insurance arrangements. Known claims are assessed as to the value and probability of settlement. Where it is material the overall expected value of known claims taking probability of settlement into consideration is provided for in the IJB’s Balance Sheet. The likelihood of receipt of an insurance settlement to cover any claims is separately assessed and, where material, presented as either a debtor or disclosed as a contingent asset. There are no outstanding claims or any indications that any claims are to be made against the IJB. 2 Critical Judgements and Estimation Uncertainty The critical judgements made in the Financial Statements relating to complex transactions are: • The partner organisations have considered their exposure to possible losses and made adequate provision where it is probable that an outflow of resources will be required, and the amount of the obligation can be measured reliably. Where it has not been possible to measure the obligation, or it is not probable in the partner organisations’ options that a transfer of economic benefits will be required, material contingent liabilities have been disclosed (there are none). • The Annual Accounts contains estimated figures that are based on assumptions made by the IJB about the future or that are otherwise uncertain. Estimates are made taking into account historical experience, current trends and other relevant factors. However, because balances cannot be determined with certainty, actual results could be materially different from the assumptions and estimates. • There are no items in the IJB’s Balance Sheet at 31 March 2023 for which there is a significant risk of material adjustment in the forthcoming financial year. Provisions The IJB has not created any provisions in respect of compensation claims. It is not certain that all claims have been identified or that the historic level of settlement payments is a reliable guide for future settlements. 3 Subsequent Events In accordance with the requirements of International Accounting Standards 10, events after the reporting period are considered up to the date on which the accounts are authorised for issue. This is interpreted as the date that the accounts were certified by the Chief Financial Officer following approval by the Audit and Risk Committee. Page 84 of 122
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39 Events after the Balance Sheet date are those events, both favourable and unfavourable, that occur between the end of the reporting period and the date when the Annual Accounts are authorised for issue. Two types of events can be identified. • Adjusting events: Those that provide evidence of conditions that existed at the end of the reporting period. The Annual Accounts is adjusted to reflect such events. • Non-adjusting events: Those that are indicative of conditions that arose after the reporting period and the Statements are not adjusted to reflect such events. Where a category of events would have a material effect, disclosure is made in the notes of the nature of the events and their estimated financial effect. 4 Expenditure and Funding Analysis Services specifically for Midlothian 2021/22 £000’s 2022/23 £000’s Health 75,000 72,439 Social Care 46,352 60,522 Midlothian’s share of Lothian Health Services (Hosted) 25,853 27,638 Midlothian’s share of Lothian Health Services (Set Aside) 20,698 22,586 Total 167,903 183,185 Funded by: Midlothian Council 50,598 56,612 Funded by: NHS Lothian 127,825 116,218 Total Funding 178,423 172,830 Surplus 10,519 (10,355) Expenditure above has been split into three main areas: • Expenditure on those services delivered specifically for the population of Midlothian. These services are managed locally by the Midlothian Partnership • Hosted Services – these are health services managed either by the Edinburgh, East Lothian and West Lothian Partnerships or managed by NHS Lothian on a pan-Lothian basis. These services included Mental Health Services, Learning Disability Services, Substance Misuse Services, Rehabilitation services, General Dental Services, General Pharmaceutical Services and General Ophthalmic Services. This is the IJB’s agreed share of these services • Set Aside Services – these are services delivered in the main acute hospitals (Royal Infirmary of Edinburgh, Western General Hospital and St. John’s Hospital) and managed by NHS Lothian. This is the IJB’s agreed share of these services. 5 Corporate Service Included in the above costs are the following corporate services: Page 85 of 122
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40 2021/22 £000’s 2022/23 £000’s Staff (Chief Officer) 54 53 CNORIS 3 3 Audit Fee 28 32 Total 85 88 As noted above, the Chief Finance Officer is not charged to the IJB. 6 Related Party Transactions As partners with the Integration Joint Board, both Midlothian Council and NHS Lothian are related parties and the material transactions with these bodies are disclosed in these accounts. There are elements of expenditure which are shown against the NHS Lothian above but where the resources are used by the social care services delivered by Midlothian Council. 2021/22 £000’s 2022/23 £000’s NHS Lothian 121,552 122,663 Resource Transfer (7,173) (7,109) Social Care Fund (4,816) (4,816) Net NHS Lothian Expenditure 109,563 110,738 Midlothian Council 46,352 56,612 Resource Transfer 7,173 7,109 Social Care Fund 4,816 4,816 Gross Social Care Expenditure 58,341 72,447 Both Resource Transfer and the Social Care Fund are resources which are part of the NHS Lothian budget, but these funds are used to deliver social care service supplied by Midlothian Council. 7 Short Term Debtors 2021/22 £000’s 2022/23 £000’s Funding due from NHS Lothian 11,899 5,454 Funding due from Midlothian Council 11,613 7,703 Total 23,512 13,157 8 Short Term Creditors 2021/22 £000’s 2022/23 £000’s Funding due to NHS Lothian 0 0 Funding due to Midlothian Council 0 0 Total 0 0 Page 86 of 122
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41 9 VAT The IJB is not VAT registered. The VAT treatment of expenditure in the IJB’s accounts depends on which of the Partner agencies is providing the service as these agencies are treated differently for VAT purposes. Where the Council is the provider, income and expenditure excluded any amounts related to VAT, as all VAT collected is payable to H.M. Revenue & Customs and all VAT paid is recoverable from it. The Council is not entitled to fully recover VAT paid on a very limited number of items of expenditure and for these items the cost of VAT paid is included within service expenditure to the extent that it is irrecoverable from H.M. Revenue and Customs. Where the NHS is the provider, expenditure incurred will include irrecoverable VAT as generally the NHS cannot recover VAT paid as input tax and will seek to recover its full cost as income from the Commissioning IJB. Page 87 of 122
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Midlothian Integration Joint Board Audit and Risk Committee Wednesday 28 June 2023, 2pm Risk Register Executive summary The Integrated Joint Board (IJB) Audit and Risk Committee maintains a strategic risk profile which is regularly scrutinised. However, it is important that Midlothian IJB is kept informed of its key risks and the actions undertaken to manage these risks. This report contains the strategic risk profile covering Quarter 3 2022/23, 1st October 2022 – 31st December 2022 and Quarter 4 2022/23, 1st January 2023 – 31st March 2023. Committee members are asked to: Consider the strategic risk profiles and response to the issues, risk and opportunities with regards Quarter 3 2022/23 and Quarter 4 2022/23 risk profiles. # Item number: 5.4 Page 89 of 122
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Midlothian Integration Joint Board Report Risk Profile 1 Purpose 1.1 This includes the Strategic Risk Profile for Quarter 3 2022/23, 1 October 2022 – 31 December 2022 and Quarter 4 2022/23, 1st January 2023 – 31st March 2023. 2 Recommendations 2.1 As a result of this report, Members are being asked to:- • Consider the strategic risk profiles. 3 Background and main report 3.1 The IJB’s Audit and Risk Committee regularly scrutinises the strategic risk profile and generally reports back to the IJB quarterly. 3.2 Quarter 3 2022/23 Strategic Risk Profile and Quarter 4 2022/23 Strategic Risk Profile are appended to this report, to cover 1st October 2022 – 31 December 2022 and 1st January 2023 – 31st March 2023. 3.3 There have been no new risks added however, given pressures within workforce recruitment and retention, the Risk Evaluation increased from Medium to High Risk in Quarter 3 and persists at High through Quarter 4. Financial Sustainability increased from Medium to High Risk from Quarter 3 to Quarter 4 given reduced budget offer from partners and the requirement for further savings over and above those planned and captured within the medium term financial plan; with Impacts of New Legislation remaining Critical, owing to the pause on the National Care Bill progression by the Scottish Government. 3.4 There is a significant risk to our partner agencies that we may not be able to recruit staff to maintain safe levels of staff, staff with required specialist knowledge or the volume of staff required to meet service demands. As a consequence, there could be an inability to recruit and retain the required workforce because of national workforce challenges and local challenges (aging workforce, specialist services, completion from hospitality/retail). This leads to increased costs from reliance on medical locums and agency staff, not only for the IJB but also for commissioned service providers. Report Page 90 of 122
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Midlothian Integration Joint Board 3.5 For 2023/24, an emerging financial risk has been identified for the IJB, with a potential projected financial gap with regards to the financial plan and the uncertainty surrounding the budget offers from Partners NHS Lothian and Midlothian Council. Further to this, the IJBs financial plan also reports the significant challenges surrounding the financial sustainability of the IJB in the future across the next 5 years. This will feature in future Quarters’ risk profiles. 4 Policy Implications 4.1 There are no new policy issues raised in this paper. 5 Directions 5.1 This report does not require a new direction. 6 Equalities Implications 6.1 There are no direct equalities implications arising from this report. 7 Resource Implications 7.1 There are no direct resource implications associated with this report. 8 Risk 8.1 The risks relevant to the business of the IJB are set out within the attached strategic risk profile. 9 Involving people 9.1 The IJB meetings are held in public and IJB papers along with those of the IJB Audit and Risk committee are available on the internet. This work is supported by the IJB’s Chief Internal Auditor and the partnership’s risk management. 10 Background Papers 10.1 None. AUTHOR’S NAME Derek Oliver DESIGNATION Chief Officer - Place Page 91 of 122
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Midlothian Integration Joint Board CONTACT INFO derek.oliver@midothian.gov.uk DATE 20 June 2023 Appendices: 1.1 Strategic Risk Profile Quarter 3 2022/23 2.1 Strategic Risk Profile Quarter 4 2022/23 Page 92 of 122
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IJB Strategic Risk Profile Quarter 3 2022/2023 Risk Strategic Planning and Commissioning Risk Code Risk Identification Managed by Risk Control Measures Likelihood Impact Risk Evaluation TBA Risk Effect Risk of failure of a key care provider, including care home, care at home and other care providers due to financial instability or significant care concerns. Risk Consequence Disruption to service delivery. Requirement to implement contingency plans in the event of being the provider of last resort. Impact on individuals and families with potential disruption to care arrangements. Chief Officer Ensure robust contract monitoring and action plans are in place for improvement. Main providers are on the tender framework and registered and monitored by the Care Inspectorate. Care Home, Care at Home and LD services operationally managed by Midlothian HSCP. Assurance updates are provided routinely to IJB. Work closely with external care providers to ensure robust resilience and business continuity plans are in place. 3 5 Page 93 of 122
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Issuing of Directions Risk Code Risk Identification Managed by Risk Control Measures Likelihood Impact Risk Evaluation TBC Risk There is a risk that the IJB fails to deliver its strategic objectives because the Council and/or NHS Lothian are unable to allocate sufficient resources. Consequence This would lead to a requirement to revise the Strategic Plan and Directions. Chief Officer - Directions are monitored and reported on twice a year for performance updates. - Financial plan is approved annually by the IJB following the annual due diligence process on the budget offers from NHS Lothian and the Council - Regular updates provided to IJB on finances. - A spotlight programme has been set up to increase focus on 5 key direction areas which allows additional resources to be assigned to support the delivery of these directions. 2 3 Category 1 Responder Status Risk Code Risk Identification Managed by Risk Control Measures Likelihood Impact Risk Evaluation TBC Risk IJBs role as Category 1 responders under the Civil Contingencies Act requires that our partners NHS Lothian and Midlothian Council maintain effective business continuity and resilience plans to ensure an appropriate response in times of emergency. There is a risk that our partners may not be able to provide these assurances. Consequence Failure to maintain up to date and effective resilience plans could result in services unable to maintain essential service delivery. Executive Business Manager - Assurance reporting to IJB routinely on Chief Nurse, Chief Social Worker and Resilience. - Annual category 1 assurance report submitted to IJB - Robust operational process within Midlothian Health and Social Care to meet requirements - Lessons learnt from COVID pandemic have been incorporated within standard service delivery, ongoing work to develop a quality management approach will provide additional partnership wide assurances to IJB. 2 3 Page 94 of 122
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Workforce Recruitment and Retention Risk Code Risk Identification Managed by Risk Control Measures Likelihood Impact Risk Evaluation Risk There is a significant risk to our partner agencies that we may not be able to recruit staff to maintain safe levels of staff, staff with required specialist knowledge or the volume of staff required to meet service demands Consequence Inability to recruit and retain the required workforce because of national workforce challenges and local challenges (aging workforce, specialist services, completion from hospitality/retail) This leads to increased costs from reliance on medical locums and agency staff, not only for the IJB but also for commissioned service providers. - Workforce Strategy has been created and submitted to Scottish Government for review. Feedback is expected in Oct 2022 and an associated action plan is in place to focus on ensuring a workforce is recruited to and retained to allow the IJB Strategic Plan and Directions to be delivered. - An engagement Strategy is also under development to promote and improve our engagement as an organisation with our staff. - Development of a Workforce Group to focus on specific areas of strength and weakness within Midlothian, this group will take the lead with the implementation of the Workforce Strategy and Engagement Strategy across out workforce. - Support commissioned care providers with recruitment and retention. 4 4 Page 95 of 122
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Financial Sustainability Risk Code Risk Identification Managed by Risk Control Measures Likelihood Impact Risk Evaluation TBA Risk Inadequate resources to meet demand and deliver the IJBs Strategic Plan. Consequence Inability to deliver Strategic Plan and meet demand within existing resources. Overspends due to excessive demand for services, quality failures, and cuts in other services to mitigate this Chief Financial Officer Chief Finance Officer responsible for the governance, appropriate management of finance and financial administration of the IJB. Early Warning Indicators from NHS Lothian and Midlothian Council. Strong budgetary control systems in place within NHS Lothian and Midlothian Council. IJB Medium term financial plan developed annually. 3 4 Impacts of New Legislation Risk Code Risk Identification Managed by Risk Control Measures Likelihood Impact Risk Evaluation TBA Risk There is a risk of further legislative, policy developments or change which impacts on the IJBs ability to deliver on the Strategic Plan, examples include Independent Review of Adult Social Care, Continuing Care, the Living Wage, the Carers Act, and other future policy developments. Consequence Inability to deliver SG policies alongside the Strategic Plan and IJB's agreed objectives and the impact of additional unfunded cost pressures Head of Adult Services - The National Care bill is currently under consultation and we expect additional information to be released by April 2023. Midlothian HSCP is fully engaged with Scottish Government along with NHS Lothian and Midlothian Council. This risk is also being managed operationally under our partner Strategic registers. - Respond to Scottish Government information requests on impact of future policies - Horizon scanning for policy developments through partners and SMT network groups - Close working relations with Scottish Government through Chief Finance Officer, Chief Officer and Cosla. 5 5 Page 96 of 122
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Risk Management report Key: Very low risk 1-3 Low risk 4-8 Medium risk 9-15 High risk 16-20 Critical risk 25 Action Key: In progress complete Overdue Page 97 of 122
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IJB Strategic Risk Profile Quarter 4 2022/2023 Risk Strategic Planning and Commissioning Risk Code Risk Identification Managed by Risk Control Measures Likelihood Impact Risk Evaluation TBA Risk Effect Risk of failure of a key care provider, including care home, care at home and other care providers due to financial instability or significant care concerns. Risk Consequence Disruption to service delivery. Requirement to implement contingency plans in the event of being the provider of last resort. Impact on individuals and families with potential disruption to care arrangements. Chief Officer Ensure robust contract monitoring and action plans are in place for improvement. Main providers are on the tender framework and registered and monitored by the Care Inspectorate. Care Home, Care at Home and LD services operationally managed by Midlothian HSCP. Assurance updates are provided routinely to IJB. Work closely with external care providers to ensure robust resilience and business continuity plans are in place. 3 5 Issuing of Directions Risk Code Risk Identification Managed by Risk Control Measures Likelihood Impact Risk Evaluation TBC Risk There is a risk that the IJB fails to deliver its strategic objectives because the Council and/or NHS Lothian are unable to allocate sufficient resources. Consequence This would lead to a requirement to revise the Strategic Plan and Directions. Chief Officer - Directions are monitored and reported on twice a year for performance updates. - financial allocations are included within directions on an annual basis after IJB budgets have been set - The Planning, Performance and Programme team continue to support with additional capacity to redesign and transform key areas of service delivery 2 3 Page 99 of 122
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Category 1 Responder Status Risk Code Risk Identification Managed by Risk Control Measures Likelihood Impact Risk Evaluation TBC Risk IJBs role as Category 1 responders under the Civil Contingencies Act requires that our partners NHS Lothian and Midlothian Council maintain effective business continuity and resilience plans to ensure an appropriate response in times of emergency. There is a risk that our partners may not be able to provide these assurances. Consequence Failure to maintain up to date and effective resilience plans could result in services unable to maintain essential service delivery. Executive Business Manager - Assurance reporting to IJB routinely on Chief Nurse, Chief Social Worker and Resilience. - Annual category 1 assurance report submitted to IJB - Robust operational process within Midlothian Health and Social Care to meet requirements - Lessons learnt from COVID pandemic have been incorporated within standard service delivery, ongoing work to develop a quality management approach will provide additional partnership wide assurances to IJB. 2 3 Workforce Recruitment and Retention Risk Code Risk Identification Managed by Risk Control Measures Likelihood Impact Risk Evaluation Risk There is a significant risk to our partner agencies that we may not be able to recruit staff to maintain safe levels of staff, staff with required specialist knowledge or the volume of staff required to meet service demands Consequence Inability to recruit and retain the required workforce because of national workforce challenges and local challenges (aging workforce, specialist services, completion from hospitality/retail) This leads to increased costs from reliance on medical locums and agency staff, not only for the IJB but also for commissioned service providers. Integration Manager - Workforce Strategy was submitted and approved by Scottish Government in December 2022. Feedback will be provided annually and an associated action plan is in place to focus on ensuring a workforce is recruited to and retained to allow the IJB Strategic Plan and Directions to be delivered. - An engagement Strategy is also under development to promote and improve our engagement as an organisation with our staff. - Development of a Workforce Group to focus on specific areas of strength and weakness within Midlothian, this group will take the lead with the implementation of the Workforce Strategy and Engagement Strategy across out workforce. - Support commissioned care providers with recruitment and retention. 4 4 Page 100 of 122
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Financial Sustainability Risk Code Risk Identification Managed by Risk Control Measures Likelihood Impact Risk Evaluation TBA Risk Inadequate resources to meet demand and deliver the IJBs Strategic Plan. Reduced budget offer from Partners. Consequence Inability to deliver Strategic Plan and meet demand within existing resources. Overspends due to excessive demand for services, quality failures, and cuts in other services to mitigate this Requirement for further savings over and above those planned for in IJBs medium terms financial plan may impact the delivery of the strategic plan. Chief Financial Officer Chief Finance Officer responsible for the governance, appropriate management of finance and financial administration of the IJB. Strong budgetary control systems in place within NHS Lothian and Midlothian Council. IJB Medium term financial plan developed annually. Working in partnership in the financial environment with Midlothian Council and NHS Lothian. IJBs General Reserve. 4 4 Impacts of New Legislation Risk Code Risk Identification Managed by Risk Control Measures Likelihood Impact Risk Evaluation TBA Risk There is a risk of further legislative, policy developments or change which impacts on the IJBs ability to deliver on the Strategic Plan, examples include Independent Review of Adult Social Care, Continuing Care, the Living Wage, the Carers Act, and other future policy developments. Consequence Inability to deliver SG policies alongside the Strategic Plan and IJB's agreed objectives and the impact of additional unfunded cost pressures Head of Adult Services - Scottish Government have paused The National Care Bill until end of June 2023. Midlothian HSCP is fully engaged with Scottish Government along with NHS Lothian and Midlothian Council. This risk is also being managed operationally under our partner Strategic registers. - Respond to Scottish Government information requests on impact of future policies - Horizon scanning for policy developments through partners and SMT network groups - Close working relations with Scottish Government through Chief Finance Officer, Chief Officer and Cosla. 5 5 Page 101 of 122
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Risk Management report Key: Very low risk 1-3 Low risk 4-8 Medium risk 9-15 High risk 16-20 Critical risk 25 Action Key: In progress complete Overdue Page 102 of 122
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Midlothian Integration Joint Board Audit and Risk Committee 28 June 2023 at 2pm Midlothian IJB Internal Audit Annual Plan 2023/24 Executive summary The purpose of this report is to gain approval to the proposed Internal Audit Annual Plan 2023/24 for the Midlothian Health and Social Care Integration Joint Board (MIJB) to enable the MIJB Chief Internal Auditor to prepare the annual opinion on the adequacy of the overall control environment of the Midlothian Health and Social Care Integration Joint Board. The MIJB Audit and Risk Committee is therefore asked to approve the MIJB Internal Audit Annual Plan 2023/24 (Appendix 1). Item number: Page 103 of 122
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Midlothian Integration Joint Board Page 2 Report Midlothian IJB Internal Audit Annual Plan 2023/24 1. Purpose 1.1 The purpose of the Report is to present the proposed Internal Audit Annual Plan 2023/24 for the Midlothian Health and Social Care Integration Joint Board for discussion and approval by the MIJB Audit and Risk Committee. 2. Recommendations 2.1 To approve the Internal Audit Annual Plan 2023/24 for the Midlothian Health and Social Care Integration Joint Board. 3. Background and main report 3.1 Internal Audit activity adds value to the organisation (and its stakeholders) when it considers strategies, objectives, and risks; strives to offer ways to enhance governance, risk management and control processes; and objectively provides relevant assurance. The Internal Audit programme of work is designed to add value to and improve the Midlothian Health and Social Care Integration Joint Board’s operations in order to meet the objectives set out in the Strategic Plan. 3.2 The key standards within the Public Sector Internal Audit Standards (2017) which relate to the preparation of the Internal Audit plan are summarised below: • Standard 2010 – Planning which states that “the chief audit executive must establish risk-based plans to determine the priorities of the internal audit activity, consistent with the organisation’s goals” • Standard 2020 – Communication and Approval which states that “the chief audit executive must communicate the internal audit activity’s plans and resource requirements, including significant interim changes, to senior management and the board for review and approval. The chief audit executive must also communicate the impact of resource limitations.” 3.3 The Internal Audit Annual Plan 2023/24 for the MIJB (Appendix 1) includes sufficient work to enable the MIJB’s appointed Chief Internal Auditor to prepare an annual independent and objective audit opinion on the adequacy of the arrangements for risk management, governance and control of the delegated resources within the MIJB. Page 104 of 122
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Midlothian Integration Joint Board Page 3 4. Reporting of Internal Audit Results 4.1 At the end of the year the Internal Audit Annual Assurance Report 2023/24 for the MIJB which will be reported to Management and to the MIJB Audit and Risk Committee, for governance and scrutiny purposes, will include the audit opinion based on the audit work during the year, and will state the results from each audit engagement outlining the risks, controls and conclusions. It will also state any Internal Audit recommendations that have been made to improve internal controls and governance in the form of an improvement action plan that will include the responsible owner and timescale for implementation. The outcomes of any monitoring of implementation of agreed actions or acceptance of risk will also be stated. 4.2 The Internal Audit findings and annual opinion will be used to inform the MIJB’s Annual Governance Statement for inclusion in the MIJB’s Annual Report and Accounts. 5. Directions 5.1 There are no Directions implications arising from this report. 6. Equalities Implications 6.1 There are no equalities implications. 7. Resource Implications 7.1 There is a commitment by Midlothian Council to provide Internal Audit resource to the MIJB. The Midlothian Council Internal Audit Annual Plan 2023/24, to be presented to its Audit Committee on 7 March 2023 for approval, allocates a total of 40 days to support the MIJB Internal Audit Annual Plan 2023/24, including providing the MIJB Chief Internal Auditor. The Internal Audit Charter and Internal Audit Strategy, presented for approval at the same meeting of Midlothian Council Audit Committee, are applicable for the provision of Internal Audit services to MIJB. Those documents set out respectively the conformance of the Internal Audit team to the PSIAS standards and the approach to the planning, delivery and reporting of Internal Audit activity associated with the MIJB. 7.2 There is a commitment by NHS Lothian to provide Internal Audit resource to the MIJB. The NHS Lothian Internal Audit team will provide 30 days per IJB which will be reflected in the NHS Lothian Internal Audit Annual Plan 2023/24 that is scheduled for presentation to its Audit and Risk Committee for approval in accordance with its Internal Audit governance. Page 105 of 122
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Midlothian Integration Joint Board Page 4 8. Risks 8.1 Key components of the audit planning process include a clear understanding of the MIJB’s functions, associated risks, and potential range and breadth of audit areas for inclusion within the plan. As in previous years, to capture potential areas of risk and uncertainty more fully, key stakeholders have been consulted. This exercise is informed by key developments at both a national and local level and other relevant background information, for example the Strategic Plan. Discussions with the MIJB’s Chief Officer and Chief Finance Officer will continue on a regular basis to ensure Internal Audit assurance meet the needs of the MIJB and Management and other key stakeholders. The MIJB Internal Audit Annual Plan 2023/24 has been informed by the risks, controls and mitigation actions as set out within the MIJB’s Strategic Risk Register to ensure that Internal Audit plans are risk-based and provide relevant assurance. 8.2 The PSIAS require Internal Audit to evaluate the effectiveness of the MIJB’s Risk Management arrangements and contribute to improvements in the process. Each Internal Audit assignment will be risk-based and will test the MIJB’s management of risk. 8.3 The MIJB Internal Audit Annual Plan 2023/24 should be considered to be flexible and will be periodically reviewed, and amended as required, to reflect any new arrangement or changing risks and priorities. Any amendments relating to the MIJB will be brought to the MIJB Audit and Risk Committee for approval. 9. Involving People 9.1 Consultation on this Plan has been undertaken with the MIJB Chief Officer, Chief Finance Officer and Integration Manager prior to submission to the MIJB Audit and Risk Committee. 10. Background Papers See Appendix 1. AUTHOR’S NAME Duncan Stainbank DESIGNATION MIJB Chief Internal Auditor CONTACT INFO Duncan.Stainbank@midlothian.gov.uk DATE 23/02/2023 Page 106 of 122
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Midlothian Health and Social Care Integration Joint Board Internal Audit Annual Plan 2023/24 Appendix 1 Ref Category Audit Days Commentary 1. Assurance Annual Assessment of Internal Control and Governance 12 Prepare an annual assurance report for MIJB Management and MIJB Audit and Risk Committee summarising the work undertaken by Internal Audit during the year and forming an opinion on the adequacy of the MIJB’s arrangements for risk management, governance and internal control for delegated resources. Conduct a high level review of risk management arrangements in operation. Test a sample of the key elements in the MIJB Code of Corporate Governance to determine whether these are operating effectively. This will be used to inform the MIJB’s Annual Governance Statement. 2. Assurance Publications Scheme 30 NHS Lothian Internal Audit team will deliver this Audit. Review the processes in place to ensure that the IJB has in place a complete, accurate, up to date, relevant and accessible publications scheme in line with appropriate guidance and regulation. 3. Assurance Directions Setting 15 Review the processes in place in setting IJB directions and the Governance processes in place to monitor and review the directions on an ongoing basis. Page 107 of 122
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Ref Category Audit Days Commentary 4. Other Recommendations Follow Up Review 8 Undertake two reviews: The first will assess performance against closing Audit Actions by the agreed due date; and the second will include a sample check on the adequacy of new internal controls for Audit Actions flagged as closed. 5. Other Administration of Audit Scotland Reports 1 Monitor publication of Audit Scotland reports and co-ordinate submission by Management of relevant Audit Scotland Reports to the MIJB Audit and Risk Committee / Board. 6. Other Audit Committee Self- Assessment 1 Provide assistance to Chair in undertaking a self-assessment of the MIJB Audit and Risk Committee against the CIPFA best practice guidance. 7. Other Attendance at Boards / Committees 2 Prepare for and attend MIJB Board / Audit and Risk Committee meetings. 8. Other Audit Planning for 2024/25 1 Renew risk assessment, develop and consult on proposed coverage within the MIJB Internal Audit Annual Plan 2023/24. Total 70 Midlothian Council’s Internal Audit function will provide 40 days and NHS Lothian Internal Audit team will provide 30 days to support the delivery of the Plan. Page 108 of 122
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Midlothian Integration Joint Board Audit and Risk Committee 28 June 2023 at 2pm Midlothian IJB Internal Audit Report: Medium Term Financial Planning Executive summary The purpose of this report is to present the findings and recommendations from the recently completed Internal Audit review of Medium Term Financial Planning, completed in partnership between the Midlothian Council and NHS Lothian Internal Audit teams. The MIJB Audit and Risk Committee is therefore asked to consider the findings and recommendation from the final Internal Audit review of Medium Term Financial Planning. Item number: Page 109 of 122
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Midlothian Integration Joint Board Page 2 Report Midlothian Internal Audit Report: Medium Term Financial Planning 1. Purpose 1.1 The purpose of this report is to present the findings and recommendations from the recently completed Internal Audit review of Medium Term Financial Planning, completed in partnership between the Midlothian Council and NHS Lothian Internal Audit teams 2. Recommendations 2.1 To consider the findings and recommendations from the recently completed Internal Audit review of Medium Term Financial Planning. 3. Background and main report 3.1 As part of the Internal Audit Plan for 2022/23, approved by the audit and risk committee on 3 March 2022, an Internal Audit of Medium Term Financial Planning. 3.2 The report presents the findings of the review with the internal audit work undertaken by the NHS Lothian Internal Audit team and managed through the Midlothian Council Internal Audit team. The report provides 3 medium and 1 low rated recommendations that have all been agreed by the Chief Financial Officer. 4. Directions 4.1 There are no Directions implications arising from this report. 5. Equalities Implications 5.1 There are no equalities implications. 6. Resource Implications 6.1 There are no resource implications. Page 110 of 122
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Midlothian Integration Joint Board Page 3 7. Risks 7.1 Key risks in relation to ensuring appropriate and adequate medium term financial planning within the IJB have been considered as part of the review. 8. Involving People 8.1 Consultation on this Internal Audit Report has been undertaken with the MIJB Chief Officer and Chief Finance Officer prior to submission to the MIJB Audit and Risk Committee. 9. Background Papers See Appendix 1. AUTHOR’S NAME Duncan Stainbank DESIGNATION MIJB Chief Internal Auditor CONTACT INFO Duncan.Stainbank@midlothian.gov.uk DATE 21/06/2023 Page 111 of 122
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Auditor: Russell Richmond-McIntosh Final Internal Audit Report To Morag Barrow, Chief Officer – Midlothian IJB Claire Flanagan, Chief Finance Officer – Midlothian IJB On Midlothian IJB Medium-Term Financial Planning 15 May 2023 Page 113 of 122
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Midlothian Council Internal Audit Report – Midlothian IJB Medium-term Financial Planning Process 1 | P a g e 1 Introduction 1.1 IJBs were established across Scotland as a requirement of the Public Bodies (Joint Working) (Scotland) Act 2014 (the Act) as a means for health boards and local authorities to integrate adult health and social care services and budgets, through delegation to a locally accountable body. 1.2 In July 2015, following its formal establishment, Midlothian IJB (MIJB) took on duties in the Midlothian Council area for development of integrated planning and delivery of health and social care services and criminal justice social work, as well as certain acute hospital services managed by NHS Lothian. 1.3 The IJB’s overall financial strategy is to use the totality of the resources available to it to deliver its Strategic Plan with the challenge being to decide how to use these resources effectively. This has to be considered against a general background of increased demand and a reduction in the totality of the resources available to the IJB. There are currently areas of significant financial pressure or financial risk which need to be considered as part of this overall approach. 1.4 Although the IJB is not an operational management body (all the IJB’s services are provided by or commissioned by the partners) it remains ultimately responsible for the delivery of services. The financial planning should lay out the resources available and reflected into the budget setting process for each service. Each service should therefore understand what it is required to deliver (activity), what model of delivery it should use, the resources available to undertake this (the budget) and the outcomes required. 2 Audit Scope 2.1 The objective of this review was to assess the design adequacy and operating effectiveness of the key controls supporting MIJB’s medium term financial planning process. Our audit approach was as follows: • Obtain understanding of the key areas outlined in scope above, through discussions with key personnel, review of management information and walkthrough test, where appropriate. • Identify the key risks relevant to medium-term financial planning. • Evaluate the design of the controls in place to address the key risks; and • Test the operating effectiveness of the controls in place. 3 Management Summary 3.1 The Medium-Term Financial Plan 2022/23 - 2026/27 was prepared by the Chief Finance Officer and presented to the Midlothian IJB on 15 December 2022. Future NHS Lothian costs within the financial plan are based on the detailed financial planning exercise conducted by NHS Lothian. NHS Lothian presented their Financial Plan to their Finance & Resources Committee on 26 October 2022. 3.2 For Midlothian Council, a starting position of baseline expenditure for Social Care at £955k overspent (being the Q2 forecast projection for 2022/23) was assumed. Future years increased expenditure was based on a combination of sources for pay awards Page 114 of 122
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Midlothian Council Internal Audit Report – Midlothian IJB Medium-term Financial Planning Process 2 | P a g e it assumes in future years a 2.5% uplift similar to assumptions made within Midlothian Council’s longer-term projections. In addition, demographic growth is assumed at 3% and includes growth for any transitions into Adult Services. 3.3 The IJB’s medium term financial plan presented in December 2022 to the Midlothian IJB highlighted the financial challenges facing the IJB in 2023/24 and beyond. For 2023/24 the IJB was projecting a £4.5m financial gap. The IJB’s financial plan has been refined as partners refined their own financial plans. Projections based on the February 2023 iteration of partners’ financial plans have noted the financial gap to be £4.3m. This iteration has noted the same IJB income assumptions based on the Scottish Government’s parameters of budget offers being flat cash plus the uplift or additional funding provided for IJBs, alongside further movement regarding prescribing expenditure and to take account of the reduction of £1.3m to the IJB budget from Midlothian Council. This moves the IJB’s projected gap for 2023/24 to £6m before any recovery. The financial update made to the Board on 16 March 2023 has included the status of the Board’s medium term financial plan, alongside the financial recovery plans and assumptions totalling £4.7m to support the IJB in delivering financial balance in 2023/24. 3.4 Consequently, while the Board has been asked to agree and accept the budget offer from NHS Lothian, it has also been asked to agree the recommendation from the March IJB budget paper to not accept the IJB budget offer from Midlothian Council for 2023/24. As a result, without the identification and agreement of additional financial recovery actions, the IJB will have an unbalanced budget going into financial year 2023/24 and the risk of being unable to meet its financial commitments for the year. 3.5 In April 2023, the members of the IJB were asked to note the financial gap incurred by the reduced budget offer from Midlothian Council and agree the additional recovery actions to be progressed by officers to address the funding gap. As this is likely to impact on the Board’s strategic objectives and integration directions, a decision has been deferred until June 2023 while members consider their options. 3.6 The Risk Register for Midlothian IJB has recorded under ‘Financial Sustainability’ the risk that inadequate resources are likely to result in the Board being unable to meet demand and deliver the Board’s Strategic Plan. Risk control measures include the annual development of the medium-term financial plan. 3.7 Some areas for improvement have been noted from the review and are summarised here. While the audit has noted the delay to the publication of the Medium-Term Financial Plan, there is no documented financial planning process to advise the Board of the key stages relevant to the preparation and publication of the Medium-Term Financial Plan. The Medium-Term Financial Plan 2022/23 – 2026/27 has included no reference to the Midlothian IJB's Strategic Plan. As such, the Medium-Term Financial Plan does not fully assist in the strategic planning process and allow the IJB to take informed decisions when planning for the future and ensuring financial sustainability in the medium term. There is no formal process or arrangements agreed and in place within the IJB for the ongoing monitoring of progress against the delivery of the medium-term financial plan recovery actions. The Risk Register for the IJB requires to be developed further to include an additional risk specific to the Board’s financial challenges for the years ahead. Page 115 of 122
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Midlothian Council Internal Audit Report – Midlothian IJB Medium-term Financial Planning Process 3 | P a g e 3.8 Issues arising have been communicated directly to relevant Service Management (the audit fieldwork was undertaken in March and April 2023). While the financial challenge to the Board has been noted by this review and the likely impact on the delivery of the Medium-term Financial Plan, we have raised three Medium priority and one Low priority recommendations. These are detailed in section five of this report and are discussed in detail within section four. 3.9 The Internal Audit function conforms to the professional standards as set out in the Public Sector Internal Audit Standards (2017), including the production of this report to communicate the results of the review. We would like to thank those officers who assisted us during our review. Page 116 of 122
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Midlothian Council Internal Audit Report – Midlothian IJB Medium-term Financial Planning Process 4 | P a g e 4 Findings Expected Control Summary Results Recommendation / Rating MIJB's medium term financial planning process is clearly documented and established. The medium-term financial planning process is aligned with the IJB budget setting/offers from NHS Lothian and Midlothian Council. The Medium-Term Financial Plan 2022/23 – 2026/27 has been prepared utilising the in-year financial information and the financial plans and assumptions of Partners for future years. The Midlothian IJB was advised of the Midlothian Council budget award on 15 February 2022, with the NHS Lothian budget award communicated to the Board on 12 May 2022. The Medium-Term Financial Plan 2022/23 – 2026/27 was prepared by the Chief Finance Officer and presented to the Board on 15 December 2022. While this review has noted the delay to the publication of the Medium-Term Financial Plan, related to the update of the Board’s Strategic Plan and further clarity around the provision of Covid Funding, the late publication of the Plan has resulted in the Board being unable to adequately consider its financial commitments going forward as soon as possible following budget confirmation. Also, there is no documented financial planning process to advise the Board of the key stages relevant to the preparation and publication of the Medium-Term Financial Plan. Consequently, there is no timeline or instruction for the Board to note and includes: • When to develop the Medium-Term Financial Plan; • What to consider when developing the Plan; • Template/content of the plan; • Timeline for presenting the Medium-Term Financial Plan to the IJB for information/approval. 5.1 / Low Page 117 of 122
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Midlothian Council Internal Audit Report – Midlothian IJB Medium-term Financial Planning Process 5 | P a g e Expected Control Summary Results Recommendation / Rating Financial planning is consistent with the strategic plan, ensuring that adequate resources are in place to support the achievement of MIJB's short, medium and long- term objectives According to the March 2022 Integration Scheme, The Finance Officer is responsible for preparing a medium-term financial plan to be incorporated into the Board’s Strategic Plan. The Midlothian IJB Strategic Plan 2022-25 also notes that the IJB’s separate detailed medium-term financial plan is being developed to cover the period of the new Strategic Plan. However, the Medium-Term Financial Plan 2022/23 – 2026/27 has included no reference to the Midlothian IJB's Strategic Plan. As such, the Medium-Term Financial Plan cannot assist in the strategic planning process and allow the IJB to take informed decisions when planning for the future and ensuring financial sustainability in the medium term. Medium-term financial plans prepared by IJBs elsewhere were reviewed and compared against the Midlothian IJB Medium-Term Financial Plan. While the Plan has made reference to the Scottish Government’s Medium Term Financial Framework for Health and Social Care in its preparation, and the anticipated income/expenditure for the years ahead, the Plan has provided no further information that makes clear: • The link to the Board's Strategic Priorities; • The Local and National Context (i.e. demographic analysis and challenges, hosted services consumption, legislative and policy implications (e.g. Adult Social Care & Primary Care Improvement Plan); • Financial risks associated with the Plan's assumptions. 5.2 / Medium Progress of delivery against medium term financial plans objectives is monitored by management / relevant MIJB Governance forum In March 2023, the Midlothian IJB was asked to note the financial recovery plans and assumptions to support the IJB’s financial balance for 2023/24, amounting to £4.7m. Then, in April 2023 the Board was advised of the financial gap incurred by a reduced budget offer from Midlothian Council, and that additional financial recovery plans were required to support an extra £1.33m budget gap to deliver a balanced budget for the IJB for 2023/24. Monthly financial statements are prepared by NHS Lothian Finance staff and issued to the Chief Finance Officer and NHS Lothian Business Partner. These include performance against the financial Recovery Plans. 5.3/Medium Page 118 of 122
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Midlothian Council Internal Audit Report – Midlothian IJB Medium-term Financial Planning Process 6 | P a g e Expected Control Summary Results Recommendation / Rating The accountability of actions and monitoring arrangements for the savings plans are carried out via the HSCP Finance and Performance meetings. Both hosted and set aside savings plans are monitored and assessed through the NHS Lothian financial recovery plan reporting process and the quarterly review meetings. However, while the Midlothian IJB Board has agreed the additional recovery actions to be progressed by Officers to support the subsequent funding gap, there is no formal process or arrangements agreed and in place within the IJB for the ongoing monitoring of progress against the delivery of the medium-term financial plan recovery actions. All significant financial planning risks have been identified and reflected in the MIJB risk register The risk register is reported quarterly to the MIJB Audit and Risk Committee and thereafter presented to the Board. The Risk Register reported to the Midlothian IJB Audit and Risk Committee on 2 March 2023 was obtained for review. The report contained the strategic risk profile covering Quarter 3 (1 October 2022 - 31 December 2022). For 2023/24, the emerging financial risk has been identified by the IJB, resulting from the projected financial gap with and the uncertainty surrounding the budget position. The risk register records under Financial Sustainability the risk of "inadequate resources to meet demand and deliver the IJBs Strategic Plan", with risk control measures that includes ‘’IJB medium term financial plan developed annually, alongside Early Warning indicators from NHS Lothian and Midlothian Council and budgetary control within the Partnership.’’ However, considering the financial pressures and anticipated financial gap, the medium- term financial plan as it currently stands does not provide an adequate control to the delivery of the IJB's strategic objectives. Furthermore, the current risk has a scored likelihood of 3 and impact 4, which has it rated as a medium risk. Considering the issues around the financial plan, budgets and financial balance, this is insufficient due to the criticality of the risk to achieving financial balance. 5.4/Medium Page 119 of 122
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Midlothian Council Internal Audit Report – Midlothian IJB Medium-term Financial Planning Process 7 | P a g e 5 Recommendations Rec. Ref No Recommendation Rating Management Response Responsibility and Timescale 5.1 The Chief Finance Officer should develop a documented financial planning process that records in an agreed template the timeline and critical steps required for the prompt development of the Medium-term Financial Plan for the IJB. This should be shared with the Board and Partners for information. Low Agree, a process for the IJB medium term financial plan will be developed. Chief Finance Officer 31 December 2023 5.2 The Medium-term Financial Plan should be developed to include a more explicit link to the Midlothian IJB Strategic Plan and its priorities for the years ahead. This should also include the Board’s strategic priorities in a local and national context, alongside the financial risks associated with the plan’s assumptions. Medium Agree, we will continue to refine the IJBs medium term financial plan and ensure to develop linkages to the strategic plan of the IJB. Chief Finance Officer 31 December 2024 5.3 The Chief Finance Officer and Chief Officer of the IJB should ensure that the responsibility for the ongoing monitoring of financial recovery plan performance is reported to the Board and a schedule of reporting produced to support this. Medium Agree, the routine finance report to the IJB will include updates on financial recovery plans performance. We will also look to develop more detailed reporting of recovery plans through Performance Assurance & Governance. Chief Finance Officer 31 August 2023 5.4 The Risk Register for the IJB should be developed further to include an additional risk specific to the Board’s financial challenge and its inability to achieve financial balance for the years ahead. The risk should be scored appropriately considering the criticality of the risk and the impact on the delivery of the Board’s strategic priorities. Medium Agree, this will be undertaken through the normal quarterly risk register updates and will ensure to reflect the reduced budget offer from Midlothian Council and the challenge this has posed for the IJB. Chief Finance Officer 30 September 2023 Page 120 of 122
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Midlothian Council Internal Audit Report – Midlothian IJB Medium-term Financial Planning Process 8 | P a g e Recommendation Ratings Recommendations in Internal Audit Reports are suggested changes to existing procedures or processes, to improve the controls or to introduce controls where none exist. The rating of each recommendation reflects our risk assessment of non-implementation, being the product of the likelihood of the risk materialising and its impact. The ratings are: High Significant weaknesses in existing controls, leaving the Council or Service open to error, fraud, financial loss or reputational damage, where the risk is sufficiently high to require immediate action within one month of formally raising the issue. The risk should be added by Management to the relevant Risk Register for control and monitoring purposes and included in the relevant Head of Service Annual Assurance Statement. Medium Substantial weaknesses in existing controls, leaving the Council or Service open to medium risk of error, fraud, financial loss or reputational damage requiring reasonably urgent action within three months of formally raising the issue. Low Moderate weaknesses in existing controls, leaving the Council or Service open to low risk of error, fraud, financial loss or reputational damage requiring action within six months of formally raising the issue to improve efficiency, effectiveness and economy of operations or which otherwise require to be brought to the attention of Senior Management. Other Minor administrative weaknesses posing little risk of error, fraud, financial loss or reputational damage. The Action Plans in Internal Audit Reports address only Recommendations rated: High, Medium or Low. Out with the Internal Audit Report, we inform Service Management about Other Minor matters to improve internal control and governance. The recommendations will be input to Pentana performance system to assist with Management tracking of implementation. If responsible owners are unable to achieve the agreed timescales for actions please notify the Chief Internal Auditor with the reason for the delay in implementation and the revised timescales to assist with the implementation and follow-up of these recommendations to improve internal control and governance. Page 121 of 122
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