PFI Audit and Accounting

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PFI Audit and Accounting

• Martin Barnes FCCA, Audit and Engagement
  ManagerAudit Commission

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About me

• Audit Commission
• Private sector accountant
• Public sector auditor
• 1 of 3 NHS Audit Managers in the North East
• 1 of 1 Specialist PFI auditors, since 1999
• Transforming the Newcastle Hospitals
• University Hospital of North Durham
• National PFI Network

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Some thoughts on PPP Schemes

• Its an NHS thing, isnt it?
• Its a bad thing isnt it?
• Its about whether something is on or off Balance
  Sheet
• Its too complex for mere mortals
• Auditors say Yes or No (usually no!)

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Project phases (to contract award)
VFM strategic fitAccounting treatment
Fraud and legality risks
Affordability VFM assessment (PSC) Accounting
treatment
Strategic fit (VFM) Performance
management Contract Management
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The changing environment NHS context

• Primary care trusts (PCTs)
• Foundation trusts (FTs)
• Mergers and restructures
• Paymnt by Rsults
• Diversity and sustainability

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PPP Audit General issues

• Audit Commission approach
• The rules vacuum
• What is proportionate?
• assurance from external auditors
• Other interested parties.

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Project risk assessment
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Example Project risk assessment
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Links to audit responsibilities
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Audit risk assessment Use of Resources

• Value for Money
• Better VFM than public sector
• Robust option appraisal
• Strategic fit with service developments
• Financial Standing
• Affordability
• Costs replaced
• Impact of PbR in NHS

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Audit Risk Assessment - Accounts

• Disclosure in accounts
• Treatment of unitary payment, deferred assets,
  residual interest
• Internal control
• Statement on Internal Control
• Appointment of advisors
• Fraud and corruption
• Appointment of advisors
• Letting of large contracts
• Legality
• Compliance with procurement legislation

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Example audit risk assessment
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Developing the audit programme

• Tailored to local risks
• Joint planning with internal audit
• Longer timescale
• Those charged with Governance

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Example joint work programme
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Audit output

• Letters from appointed auditor
• Limitations
• Caveats
• Conclusion
• Reports and action plans
• Audience
• High profile
• Ad hoc reporting
• Innovations
• Phased projects

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PPP Accounting issues

• Accounting for PPP Scheme
• International Financial Reporting Standards
• On or Off Balance Sheet?
• Preparatory works
• Residual interest
• Other issues
• Deferred assets/transfer of property
• Refinancing deals

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If you only remember 3 things.

• Its just a form of procurement
• It must be about services, not buildings and
  infrastructure and
• A structured, logical approach beats the
  jargon.

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Thanks for listening

• Any Questions?