This review, based on research of over 100 NHS trust and FT annual reports, assesses NHS governance and how these arrangements are communicated. It highlights areas for improvement and provides practical advice for achieving best practice.
2. Welcome
The NHS is facing turbulent times. Public demand for its services is increasing,
along with raised expectations over the quality of care. At the same time, the service
is having to cope with financial pressures and a need to demonstrate long-term
sustainability while coping with major systemic changes. In this context, NHS
bodies need to have robust governance arrangements to help manage their way
through the myriad of complex, and sometimes competing, challenges facing them.
We have produced this report to support NHS bodies in improving their
governance arrangements. This year we are reporting a baseline position and over the
coming years we will be tracking and reporting on trends, contributing to the good
governance debate and encouraging the sharing of best practice from within and
outside of the sector.
NHS governance is a wide agenda and much has been written before. Our
approach is to come at it through the annual report, as we see this as the primary
window through which NHS bodies demonstrate their attitude to governance to
the tax-paying public. Our findings are drawn from our review of over 100 trust
and foundation trust 2010/11 annual reports (referred to as ‘trusts’ and ‘FTs’ in this
report). However, our findings are applicable to other existing and emerging bodies
commissioning or providing publicly funded healthcare services.
In many NHS bodies there are well developed governance arrangements that
support strong performance. Over the last few years, financial governance has
advanced more than clinical governance and this imbalance needs to be addressed,
particularly in response to the Francis report. We found that many trusts and FTs are
under-representing the totality of their governance arrangements in the annual report.
Our key messages are: that there needs to be an improvement in the compliance,
clarity, quality and accessibility of annual reports; and that underlying financial
and clinical governance arrangements need to be strengthened in some areas. In the
main, FTs are doing better than trusts and it is important that trusts raise the bar in
preparation for an all-FT NHS provider landscape.
We are now in the 10th year of our equivalent report in the large corporate (FTSE
350) sector. Over this period, we have positively influenced the development of annual
reporting and have seen a steady improvement from non-compliance to, in some
cases, standard-setting public reporting. The banking crisis shows there is still much
to do, but at the same time, we have observed real improvements in the underlying
governance processes, for example the increasing non-executive influence on boards.
Our ambition is to help facilitate a similar trend of improvement in the NHS.
Paul Hughes
Director
Grant Thornton Governance Institute
3. Contents
Executive summary 2
Introduction 4
The annual report 6
- The annual report
- The business review
- Going concern
- Integrated reporting
Boards and committees 13
- Boards
- Board evaluation
- Gender diversity
- Nomination committee
- The Bribery Act 2010
NEDs and governors 20
- NEDs
- The chair
- Governors
Risk and performance 28
- Principal risks
- Key performance indicators
- Better and prompt payments
Internal controls 34
- Review of effectiveness
- The annual governance statement
Audit and assurance 38
- Audit committees
- Clinical audit
- Internal audit
- External audit
Appendix A: The corporate influence 46
Appendix B: Further developments in narrative reporting 48
About us 49
NHS GOVERNANCE REVIEW 2012 1
4. Executive summary
Annual reports Boards and committees
• Trust and FT financial statements and quality • 65% of trust and 13% of FT annual reports fail to
reports contain large volumes of information adequately explain their model of board operation.
designed to meet regulatory standards that can be There is a lack of transparency on the overall board
difficult to interpret for non-specialist readers. governance arrangements that leaves readers of the
• Annual reports are often compiled to ‘tick the annual report uninformed and therefore uncertain as
box’ of regulatory requirements, rather than tell a to whether these arrangements really are effective.
complete story ‘through the eyes of management’. • 90% of trusts and 27% of FTs gave no information
• FTs are better at explaining the future development on board/committee attendance throughout the year.
of their business and their performance is closer to We are therefore left unsure whether a sufficient
the quality displayed in annual reports by the FTSE breadth of committee members were given the
350. opportunity to contribute or challenge board reports.
• The directors’ assessment of going concern will • Trusts and FTs should improve the effectiveness
require greater focus as the impact of the 2012/13 and transparency of their arrangements for board
operating framework comes into play. evaluation. 79% of trusts and 34% of FTs gave
no information about how they review their own
effectiveness, let alone obtain an independent view of
their performance.
• With women holding over a third of posts, they have
a strong foothold in NHS boards, showing the way
to their corporate cousins and contributing to a more
diverse and balanced board than seen in the large
corporate sector.
• Only 13% of trusts and 2% of FTs make gifts,
hospitality and entertainment disclosures in
their annual reports. Trusts and FTs should be
demonstrating more publicly their adherence to
ethical standards and the requirements of the
Bribery Act.
2 NHS GOVERNANCE REVIEW 2012
5. NEDs and governors Internal controls
• NEDs do not comprise the majority of board • A better description of the internal control
members for 41% of FT boards and 33% of trust system and the annual review of its effectiveness
boards. is required in FT and, particularly, trust annual
• Trusts and FTs need to describe better who sits on key reports. Currently 77% of FTs and only 58% of
committees and how they review the effectiveness of trusts do this.
individual board members.
• Half of FTs provide only ‘boilerplate’ descriptions
of the role of governors, reflecting a residual lack Audit and assurance
of clarity from FTs around how to maximise the
effectiveness of their governor input. • Annual reports for 95% of FTs and 99% of FTSE 350
companies include a good discription of the work of the
audit committe. Only 37% of trusts, however, provide
this level of coverage.
Risk and performance • The latest revision of the NHS Audit Committee
• Trusts and FTs need to improve their principal risk Handbook encourages audit committees to get involved
reporting in the annual report. 23% of trusts and 10% of in driving the more effective use of clinical audit in
FTs fail to describe the risk management process, while improving governance.
45% of trusts and 13% of FTs make no mention of the • An effective internal audit function serves as the eyes
principal risks. and ears of the audit committee, providing an objective
• The use of key performance indicators (KPIs), to help assurance programme that gives the audit committee
the reader understand how a trust or FT manages and comfort that good governance is in place. However,
measures the relative success of its strategy, is missing with only 43% of trusts and 71% of FTs referring to an
from 39% of FT and 55% of trust annual reports. effectiveness review, there is room for improvement.
• 57% of trusts and only 15% of FTs confirm that they • A substantial number of trusts (89%) and FTs (74%)
have signed up to the prompt payments code. fail to confirm that the external auditor’s objectivity and
independence is maintained when, on average, the value
of non-audit fees is equivalent to 13% of a trust’s, and
51% of a FT’s, audit fee.
NHS GOVERNANCE REVIEW 2012 3
6. Introduction
The annual report is the primary window through which any organisation showcases its attitude to
governance. If a trust or FT fails to take this opportunity in such a public document, it is reasonable
for stakeholders to conclude that this reflects the underlying culture of governance within the
organisation.
The need for good governance Against this backdrop, it is important that trusts and FTs have:
The pace of structural change and underlying financial • the cultural behaviour to deliver strong governance
pressures facing the NHS, along with increased public • processes in place to support governance – the assurance
scrutiny and the ‘patient choice’ agenda, mean that strong framework, board structures, NEDs and governors
governance arrangements are essential. As trusts move
towards an all FT market, whose governance requirements • arrangements for actively engaging with a wide group of
closely mirror the private sector, the importance of corporate stakeholders to engender their trust and respect.
governance will grow.
In the private sector, since Sir Adrian Cadbury first put Governance information flows
governance in the spotlight in the early 1990s, an evolving Trusts and FTs already have frequent communications with
stream of guidance has kept governance centre stage (see regulators and public groups of stakeholders. In the main,
Appendix A). The regulatory response to the banking crisis communications with regulators provide comprehensive
incorporated higher regulatory controls set by the Financial information on finance, governance and clinical quality as
Reporting Council. Similarly, the widely reported failings in required, but this information does not readily flow to public
quality and patient safety at some FTs and trusts have raised stakeholders. Meanwhile, we found that trusts and FTs are
the importance of governance in the NHS. highly effective at communicating with smaller groups of
public stakeholders, actively engaging with patients, the public,
members/governors, staff and commissioners on specific
chosen issues.
Outcomes of effective governance Albeit frequent, the nature of these information flows means
that a comprehensive view of governance and accountability is not
• Ensuring: seen until the trust produces its annual report.
- the strategic plan is achieved
- that financial health is achieved The results of our review indicate that many trusts and FTs
- accountability and regulatory compliance do not meet the minimum reporting standards expected in an
- quality in service provision. annual report.
• Effectively assessing risk/supporting innovation.
Some reports appear to have been compiled to ‘tick the box’ of
• Enhancing organisation reputation/competitiveness. regulatory requirements, with segments written by different
• Providing confidence in organisational governance. departments, rather than telling a single and cohesive story.
• Constructively supporting/challenging the boards.
4 NHS GOVERNANCE REVIEW 2012
7. Too much, therefore, of what would be described as ‘good
governance’ – for example, detail around the effectiveness of Methodology
the internal control system and KPIs – is not in the public
domain, or is not being brought together in a convenient This report is based on a review of the publicly available
location, to give a full and balanced view of a trust’s or FT’s 2010/11 annual reports of over 100 trusts and FTs. Our
management and performance over the year. As the need for sample is geographically dispersed and includes acute,
governance increases, it is essential that the annual report specialist and mental health trusts.
becomes a clear window into the governance of the trust or FT. Where we have carried out analysis of the quality of
the disclosures, these have been graded as follows: ‘none’
The annual report = data is missing; ‘some’ = a minimum requirement has
Trusts and FTs communicate directly and frequently with been met; ‘more’ = above adequate disclosure.
stakeholders, but the commercial sector’s approach to Where the requirements are comparable, trust and
the annual report provides a useful benchmark for the FT performance has been compared to that of the UK’s
NHS, particularly with the transition to an all FT market. FTSE 350, as published in Grant Thornton’s ‘Corporate
Our findings show that FTSE 350 companies are better Governance Review: A changing climate’ report
at communicating their governance and accountability (November 2011).
arrangements to a wide group of stakeholders in the single We have taken account of the requirements for NHS
document of the annual report. annual reports, as set out in either the Department of
If trusts and FTs were to improve the quality of the Health’s Manual for Accounts (for trusts) or Monitor’s
annual report, it would demonstrate adherence to the spirit Annual Reporting Manual (for FTs). However, these
of good governance to a much wider set of stakeholders than requirements form only a part of wider governance
at present. This would both improve accountability to the requirements and we have used both NHS specific and
wider tax-paying public, as well as demonstrate robustness acknowledged best practice guidance from other sectors
of management arrangements to regulators, banks and other to formulate our views.
institutions.
Purpose of this review
Looking through the window of the annual report, our
review is intended to identify both good practice and areas
for improvement in NHS governance.
However, while the drivers of good governance come
from internal arrangements, not the annual report itself, we
strongly contend that, as governance rises on the agenda,
creating a comprehensive, uncluttered and readable document
will enhance transparency and accountability.
Next year, we will be able to track performance trends
and comment on the NHS’s direction of travel. Our hope is
that over time, trusts and FTs can better demonstrate their
existing commitment to public accountability.
NHS GOVERNANCE REVIEW 2012 5
8. The annual report
The annual report
Trusts
Trust and FT financial statements and quality reports contain large NHS bodies are required to publish, as
volumes of information designed to meet regulatory standards that a single document, an annual report and
can be difficult to interpret for non-specialist readers. accounts. The minimum requirements
of this document are to include:
Quality not quantity is the key to Writing the annual report should
• the annual report
a good annual report. It should be not be seen as a segmented exercise,
• a statement of the accounting
free from ‘boilerplate’ text and over- yet too often this is the case and many
officer’s responsibilities
use of regulatory disclosures that simply tack the financial statements
are of interest only to a small set of and quality report on to the annual • a Statement on Internal Control
stakeholders. report, rather than integrate them into • the primary financial statements
Trust and FT financial statements and the description of the trust’s activities and notes
quality reports contain large volumes of during the year. • the audit opinion.
information designed to meet regulatory
standards that can be difficult to interpret
for non-specialist readers. The annual report should draw out the
Trusts are not required to include key messages from the quality report FTs
the full quality report or full financial and financial statements, properly cross
statements, and many do not; an average referenced, in the main body of the The annual report of FTs must, as a
annual report consists of 59 pages report. minimum, include:
compared to 151 for a FT. • a directors’ report including a
management commentary
FTs Trusts • a remuneration report
Average number of pages 151 59 • the disclosures set out in the
Longest 240 123 NHS Foundation Trust Code of
Shortest 60 21 Governance
Annual reports that include the full accounts 92% 14% • a quality report
Annual reports that include summary accounts 8% 86% • results of a staff survey
Annual reports that include the Quality Report 88% 24% • regulatory ratings
• other disclosures in the public
interest
Chapter 7 of Monitor’s NHS Foundation Trust Annual Reporting Manual, requires trusts to
include the full financial statements and quality report in their annual report. • a statement of the accounting
officer’s responsibilities
• a Statement on Internal
Control/an Annual Governance
Statement.
Both trusts and FTs are also required to
follow specific provisions of the 2006
Companies Act.
6 NHS GOVERNANCE REVIEW 2012
9. The challenge for trusts and FTs is to
produce an annual report that meets What makes a good annual report?
regulatory requirements, but provides
a concise description of the business
A good annual report is cohesive and through the eyes of management. It
model, strategic direction and risks.
should avoid jargon, use plain English and avoid ‘boilerplate’ text. It should
Trusts and FTs need to produce an
tell a consistent and balanced story of performance that highlights the items
annual report that clearly shows they
that really matter, cutting out clutter and unnecessary information.
understand the key drivers of their
A good annual report reflects on the significant changes since the
business and the information that is of
previous period, then focuses on the current year, before turning the reader’s
most use to stakeholders.
attention to the next year. It should be clear on the risks that keep the board
Are trust annual reports better
awake at night, using consistent, clear and understandable risk reporting and
because they are shorter? This
key performance indicators.
depends on the definition of ‘better’.
If this is measured by completeness of
mandated disclosures or best practice Throughout this report, comparison There are positive attributes in trust
in governance, the answer, based on the is made to the large corporate sector, and FT reports. However, we look for
findings of our research, is ‘no’. where annual reporting has been subject trusts and FTs to raise the bar on annual
To maximise its value to users, the to greater external scrutiny in past reports, starting earlier and investing
reporting framework needs to identify years, accounting for generally better sufficient time to not only meet all
ways to avoid ‘boilerplate’ disclosures scoring than trusts and FTs. However, it regulatory requirements but also to
and to encourage trusts and FTs to should be noted that: produce a good quality, user-friendly
make more meaningful disclosures • the average length of a large corporate’s document. It should be possible to do
about their businesses, while removing annual report is 135 pages, which is this without increasing the size of the
unnecessary and immaterial disclosures still too long annual report.
from annual reports. This is the challenge that we are
• large corporates took, on average, five
In order to reduce ‘clutter’ in annual laying down for trusts and FTs for
to six years from where the NHS is
reports it is imperative to change the 2011/12 and beyond and we will review
now to reach their current levels of
behaviour of all those involved in the progress in our subsequent annual
compliance.
process. This includes auditors and reviews.
regulators. Trusts and FTs should
conduct their work in the spirit of clearer
communication.
NHS GOVERNANCE REVIEW 2012 7
10. To what degree does the board demonstrate the steps taken to understand the views of major
stakeholders (patients, staff, governors, commissioners, regulators) in the nhs?
none SOME more
FTSE 350 FTSE 350 FTSE 350
0% 38% 62%
FTs FTs FTs
7% 53%
41%
Trusts Trusts Trusts
7% 71% 22%
The effectiveness of governance communications
The board should state in the annual report the steps they have
taken to ensure that members of the board, and in particular the
H Frequency of communication L
non-executive directors develop an understanding of the views of
major shareholders about their company.
Direct The annual The annual
Combined Code, D.1.2
communication general meeting report
A statement should also be included which sets out the steps that
the members of the board, in particular the non-executive directors,
have taken to understand the views of governors and members.
NHS Foundation Trust Annual Reporting Manual, Paragraph 7.56 FTSE 350
The OFR [Operating and Financial Review] shall include information about
significant relationships with stakeholders which are likely, directly or Trusts
indirectly, to influence the performance of the NHS body. For example, and FTs
relationships with patients, suppliers, employees and contractors.
Department of Health Manual for Accounts 2010/11 Chapter 2,
Paragraph 2.21
L Number of recipients H
8 NHS GOVERNANCE REVIEW 20112
11. Ten key principles and questions for trust and FT boards when reviewing
the 2011/12 annual report
Principles Questions
1 The annual report and accounts need to comply with • Do the annual report and accounts comply with relevant law
relevant law and accounting standards and give complete and accounting standards?
and accurate accounting information. • Is the information complete and accurate?
• Are the accounting policies clear, relevant and complete?
2 The front-end narrative should be consistent with the • Do the annual report and accounts present a consistent
accounts. That narrative should explain significant points message?
in the accounts and there should be no surprises hidden • Is the description of the trust’s business and how it is
in the accounts. managed in the narrative reporting consistent with segment
disclosures in the financial statements?
3 The business review should give a clear and balanced account • Does the business review reflect a balance of both the
including explaining the trust’s business model and the salient good and not so good?
features of the trust’s financial position and performance,
good and bad.
4 The business review should describe the principal risks • Does the business review explain the principle risks and
and uncertainties faced by the trust. The risks and how they are managed?
uncertainties described should genuinely be the principal • Are the narrative disclosures consistent with the accounting
ones that concern the board. The reader should be able risks and uncertainties, where appropriate?
to understand why they are important and the links to
accounting judgements and estimates should be clear.
5 If the trust has referred to key performance indicators in • Do key performance indicators reconcile to the financial
the business review, these need to be reconciled clearly to statements?
main heading figures in the accounts and any adjustments
need to be explained clearly, together with the reasons why
they have been made.
6 Important messages need to be highlighted and supported • Is the reporting of material transactions in the period clear
with relevant context and not be obscured by immaterial and transparent and have appropriate accounting policies
detail. Effective cross-referencing needs to be provided and been developed?
repetition avoided. • Have accounting policies for irrelevant and immaterial items
been removed?
• Have we cut the clutter?
7 The language used needs to be precise and explain • Is the language clear?
complex issues clearly. Jargon and ‘boilerplate’ should be • Are disclosures specific to the business’ operations and
avoided. risks?
8 Items in the annual report and accounts should be reported • Have we summarised appropriately?
at an appropriate level of aggregation to convey the
essential messages and avoid unnecessary detail. Tables
of reconciliations need to be supported by, and consistent
with, the accompanying narrative.
9 Significant changes from the prior period in policy or • Have we explained the changes and, where appropriate,
presentation need to be explained properly. are the revised accounting policies clear?
10 The spirit as well as the letter of accounting standards • Are the accounts true and fair?
needs to be followed and appropriate disclosures provided
to give a true and fair view.
NHS GOVERNANCE REVIEW 2012 9
12. The annual report
The business review
FTs are better at explaining the future development of their business in a way that is closer to the
quality displayed in annual reports by the FTSE 350.
The business review sets the tone of the clearly explain the complexities and performance for the year and future
annual report and should be the source breadth of services they provide. projections.
of the readers’ main understanding of FTs are better at explaining the The business review should address
what the trust or FT does, how it does future development of their business only those risks and uncertainties that
it and the key factors that could impact in a way that is closer to the quality are key to the trust or FT. It should
the achievement of its operational and displayed in annual reports by the explain why the risks and uncertainties
strategic goals. FTSE 350. are key, the current circumstances that
Trusts and FTs set out in their Trusts and FTs often exclude give rise to the threat and the steps
annual report a reasonable description information on the wider NHS, taken to mitigate their impact.
of their business model and the external the organisation and its principal
environment in which they operate. activities, perhaps because these are
However, they could provide a more assumed to be obvious. This, however,
complete picture to ‘set the scene’ and creates contextual gaps in explaining
To what extent do organisations describe their To what extent do organisations describe the
business and the external environment in which likely future development of their business?
they operate?
FTSE 350 FTs Trusts FTSE 350 FTs Trusts
None 0% None 0%
14% 2%
15% 17%
Some 12% Some 57%
33% 50%
70% 54%
More 88% More 43%
53% 48%
15% 29%
The business review must contain: The business review must … include the main trends and factors
(a) a fair review of the company’s business, and likely to affect the future development, performance and position
of the company’s business.
(b) a description of the principal risks and uncertainties facing
the company. Companies Act 2006, s417; 5a
Companies Act 2006, S417;3
10 NHS GOVERNANCE REVIEW 2012
13. Going concern
The directors’ assessment of going concern will require greater focus as the impact of the
2012/13 operating framework comes into play.
International Financial Reporting of IAS 1: “for non-trading entities, already taking a robust approach to
Standards require directors to assess the anticipated continuation of the going concern by assessing the position
and satisfy themselves that it is provision of a service in the future, more formally than merely relying
appropriate to prepare the financial as evidenced by inclusion of financial on the above presumption. In doing
statements on a going concern basis. provision for that service in published so, these trusts are demonstrating
There can be no automatic documents, is normally sufficient responsiveness to the challenging and
presumption that a FT is a going concern evidence of going concern”. Therefore, uncertain financial outlook and are
(see our FT 2011 briefing paper). FTs trusts are, to a greater degree, relieved already adopting the good practice
must undertake a robust review to of the going concern reporting principles that will be required when
satisfy the board on the appropriateness requirements. they achieve FT status.
of the going concern assertion. The financial pressures facing trusts
The Department of Health’s Manual should still be described in the accounts
for Accounts adapts the requirements and annual report. 21% of trusts are
to what extent does the trust describe its
assertion as a going concern?
The directors’ assessment of
FTs Trusts going concern
None 12%
79% Directors should plan their assessment of going
Some 76%
concern as early as practicable including deciding on
18% the processes, procedures, information, analyses and
board papers that will be needed. These plans should
More 12%
3% also address the evidence to be obtained, including
identifying any potential remedial actions that may need
to be addressed, to support their conclusion prior to their
The NHS foundation trust should include a statement on whether approval of financial statements.
or not the financial statements have been prepared on a going The board should request that the going concern
concern basis and the reasons for this decision, with supporting assessment is documented in sufficient detail to explain
assumptions or qualifications as necessary.
the basis of management’s conclusion with respect
NHS Foundation Trust Annual Reporting Manual, Chapter 7, to going concern. In addition, the directors should
Paragraph 7.21
be invited to review and approve the documented
assessment at the board meeting at which it is expected to
approve the financial statements.
NHS GOVERNANCE REVIEW 2012 11
14. The annual report
Integrated reporting
The International Integrated Reporting Committee (IIRC) has launched a two year pilot
programme with the objective of developing a new approach to reporting. It will build on
the foundations of financial, management commentary, governance and remuneration, and
sustainability reporting in a way that reflects their interdependence.
The IIRC defines integrated reporting The IIRC’s proposed international
as a way to bring together “material integrated reporting framework may The benefits of
information about an organisation’s well have been written with large organisations
strategy, governance, performance and corporates in mind, but the guiding
prospects in a way that reflects the principles and required content are adopting integrated
commercial, social and environmental equally applicable to the public sector reporting are real and
context within which it operates. It and may well form the basis of future measurable
provides a clear and concise guidance.
representation of how an organisation
• Greater clarity about
demonstrates stewardship and how it Our research shows there is scope to
relationships and
creates and sustains value”. An improve the annual report as a whole,
commitments: a sustainable
integrated report includes: specifically the business review, to
strategy with multi-
• an organisational overview and satisfy the diverse group of NHS
stakeholder perspective
business model stakeholders. There is a clear argument
demonstrates thoughtful,
• the operating context, including risks that the structural changes and financial
conscientious leadership.
and opportunities uncertainty facing the NHS require
trusts and FTs to retain and improve • Better decisions: developing
• strategic objectives and strategies to clarity about, and basing
stakeholder confidence, and integrated
achieve those objectives decisions upon, the
reporting could form a key part of the
• an outline of governance and solution. relationships between
remuneration arrangements financial and non-financial
information, together driving
• performance measures and outcomes
sustainability into the business
• future outlook. strategy and creating value
The content required above promotes for the organisation and its
consistency and comparability. stakeholders.
However, it is the guiding principles • Higher level of engagement
that generate the value in an integrated with all stakeholders:
report, including: integrated reporting and
• strategic focus engaging stakeholders through
• connectivity of information internet communications
challenges all participants
• future orientation
to listen to and consider all
• responsiveness and stakeholder perspectives.
inclusiveness
• Lower reputational risk:
• conciseness, reliability and assessing reputation and
materiality. reality across stakeholder
groups helps the organisation
identify areas that are at risk.
12 NHS GOVERNANCE REVIEW 2012
15. Boards and committees
65% of trust and 13% of FT annual reports to what extent does the annual report describe
fail to adequately explain their model of board how the board operates and how its duties are
discharged effectively?
operation. There is a lack of transparency on
the overall board governance arrangements
65 %
FTSE 350 FTs Trusts
that leaves readers of the annual report None 0%
uninformed and therefore uncertain whether 13%
65%
these arrangements really are effective.
Some 47%
51%
The annual reports reviewed could more effectively describe
30%
the role of the trust or FT and the overarching governance
More 53%
structures that help deliver its strategy. Of those that
36%
did make a disclosure, there was a focus on the financial 5%
and ‘business’ aspects. This means that some of the core
principles of clinical governance are left out. Few would
dispute that treating patients is the main business driver of The annual report should include the composition of the
a trust and therefore deserves some focus of attention for management board (including advisory and non-executive
effective governance arrangements. members) having authority or responsibility for directing or
FTs compare reasonably well against the FTSE 350, controlling the major activities of the entity during the year.
driven by the similar reporting standards adopted by Department of Health Manual for Accounts 2010/11, Paragraph 2.9
Monitor. The annual reporting requirements for trusts are
less aligned to the corporate sector, but there is no reason
The annual report should include the number of meetings of
why certain elements should not be adopted and used as
the board of directors and those committees and individual
good practice. For example, board and committee structures
attendance by directors.
and attendance records could be used to provide some
NHS Foundation Trust Annual Reporting Manual, Paragraph 7.57
confidence in a trust’s overall governance arrangements.
All FTs and trusts need to be careful, however, that
the annual report does not become a tick-box exercise to The annual report should include a statement of how the board of
directors and the board of governors operate, including a high-
satisfy the regulatory requirements. They should ensure the
level statement of which types of decisions are to be taken by
purpose of the annual report remains true to its principles as
each of the boards and which decisions are to be delegated to
an outward facing document that explains the performance
the executive management by the board of directors.
for the year and that the regulatory requirements fit around
The NHS Foundation Trust Code of Governance
those needs.
NHS GOVERNANCE REVIEW 2012 13
16. Boards and committees
Boards
90% of trusts and 27% of FTs gave no information on board/committee attendance throughout the
year. We are therefore left unsure whether a sufficient breadth of committee members were given
the opportunity to contribute or challenge board reports.
Among those who do disclose attendance levels, the number in what proportion of reports Is the number
of meetings of board sub-committees covering quality, risk of meetings of the board and committees and
and, to a lesser degree, finance and performance is fairly overall attendance disclosed?
consistent at both trusts and FTs.
100%
In 2011, the Institute of Chartered Secretaries and
Administrators (ICSA) produced a research report on board
papers and agendas, which commented on a gap between the
FTSE 350
theory and reality of governance in the NHS. This report was
critical of the lack of board time spent on strategy and a focus on
matters ‘to note’ rather than ‘for decision’.
Where boards are meeting eleven times a year, for half a day
or more, ICSA raised the question as to whether boards are
truly focusing on strategic or operational issues. Trusts and FTs
need to consider whether delegated authority limits have been
set correctly and whether the board needs to meet more often to
ensure appropriate decisions are made.
73%
Regardless of the number of meetings, trusts and FTs need
to articulate better how existing board structures provide the
breadth of consideration needed to support the achievement
of strategy. FTs
10%
Trusts
14 NHS GOVERNANCE REVIEW 2012
17. Average number of Board Audit Quality Risk committee Finance & performance
meetings meetings committee committee (or equivalent) committee
(or equivalent) (or equivalent)
FTs 11.5 5.4 5.8 6.1 6.1
Trusts 10.4 5.2 4.0 6.5 10.0
FTSE 350 8.7 4.4
FTs and trusts that failed to Board Audit Quality Risk committee Finance & performance
provide any disclosure on key meetings committee committee (or equivalent) committee
meetings (or equivalent) (or equivalent)
FTs 0% 5% 65% 68% 57%
Trusts 61% 78% 100% 93% 98%
The effective board
• Clear strategy aligned to capabilities.
• Vigorous implementation of strategy.
• Key performance drivers monitored.
• Effective risk management.
• Sharp focus on views of key stakeholders.
• Diverse in make-up.
• Healthy, constructive tension.
• Regular evaluation of board performance.
“Public board meetings alone are not a guarantee of
transparency and boards need to ensure that there
is a wide range of ways for the public to access
information about the way in which public resources
are deployed. These include clear, informative,
jargon-free annual reports.”
The Healthy NHS Board, NHS Leadership Council
NHS GOVERNANCE REVIEW 2012 15
18. Boards and committees
Board evaluation
Trusts and FTs should improve the effectiveness and transparency of their arrangements for
board evaluation. 79% of trusts and 34% of FTs gave no information about how they review
their own effectiveness, let alone obtain an independent view of their performance.
The lack of detail on collective and value and even less claimed to have • the role of the remuneration
individual performance evaluation is used an independent facilitator to committee is clearly explained
surprisingly high. Best practice alone evaluate the board’s effectiveness. • the annual report clearly explains
suggests boards should undertake some Our research shows that trusts how the board measures its own
form of annual evaluation of their and FTs can improve the transparency effectiveness, using an external
effectiveness. of their arrangements for collective facilitator if necessary.
The performance of the collective and individual performance appraisal.
board and its constituent parts is a clear We would therefore suggest that: The most enlightened may choose to
measure of the overall organisation’s share the findings and resulting actions.
• the accountability of the board for However, even in the FTSE 350, such
success. Therefore, it is important that success is made clear in the annual
trust and FT boards have the right openness and confidence is now only
report just starting to appear.
balance and access to skills, to ensure
effective decision making. • the performance evaluation process
Of those trusts and FTs that did for individuals is set out clearly and
disclose their arrangements, very few included with, or cross referenced
discussed how these evaluations added to, the remuneration report
How much explanation is there of how the board,
committees and individual directors are annually
formally evaluated for their performance?
FTSE 350 FTs Trusts
None 2% “The Board as a whole should develop a framework
34% for formally reviewing the effectiveness of
79%
its business management and the work of its
Some 61% committees. This will, in part, be through annual
42%
reporting mechanisms, but it is often useful for the
21%
Board to step back from these mechanisms and take
More 37%
an overview of the added value which it brings to the
24%
0% organisation.”
Governing the NHS: a guide for boards, Department of Health and
the Appointments Commission
The report should include a summary of how performance
evaluation of the board of directors, its committees and its
directors has been conducted.
NHS Foundation Trust Annual Reporting Manual, Chapter 7,
Paragraph 7.59
Explanation of methods used to assess whether performance
conditions were met and why those methods were chosen
Department of Health Manual for Accounts 2010/11, Paragraph 2.5
16 NHS GOVERNANCE REVIEW 2012
19. Gender diversity
With women holding over a third of posts, they have a strong
foothold in NHS boards, showing the way to their corporate
cousins and contributing to a more diverse and balanced board. “An effective board should not
necessarily be a comfortable place.
The Financial Reporting Council to match the diversity shown in the Challenge, as well as teamwork, is an
considers that diversity, in all its NHS where women hold over 34% essential feature. Diversity in board
aspects, serves an important purpose of these posts. FTs and trusts also composition is an important driver
in connection with board effectiveness. have a much larger number of female of a board’s effectiveness, creating
Its potential benefits lie in widening the chairs. a breadth of perspective among
perspectives on business issues brought The scarcity of women on the UK’s directors, and breaking down a
to bear on decision-making, avoiding largest corporate boards has been the tendency towards ‘group think’.”
too great a similarity of attitude and focus of considerable debate and the
helping companies understand their target for the FTSE is to reach 25% FRC Guidance on Board Effectiveness
customers and workforces. by 2015.
With women holding only 9.8% We will collect and report on a
of posts with voting rights, FTSE 350 broader range of diversity measures in
companies have a long way to go next year’s review.
Proportion of female chairs proportion of the voting board that are female
34% 14% 35% 34%
FTs Trusts FTs Trusts
Average number of female executives Average number of female non-executives
2.7 1.5
Trusts Trusts
2.5 1.8
FTs FTs
NHS GOVERNANCE REVIEW 2012 17
20. Boards and committees
Nomination committee
The nomination committee is responsible for board appointments and ensuring
there is an appropriate balance of skills, experience, knowledge and independence.
There is a fairly broad distribution on the quality of disclosures There should be a formal, rigorous and transparent procedure
on nomination committees, although a significant proportion of for the appointment of directors, which is subject to scrutiny
FTs (14%) provide no detail at all. by the nomination committee. In considering appointments
The National Health Service Act 2006 sets out how to the board, the nomination committee should:
appointments to the board of directors are made: • take into account the FT’s recruitment and selection policy
• The council of governors appoints or removes the chair • consider the balance of skills, knowledge and experience
and non-executive directors. already in place
• The non-executive directors appoint or remove the chair. • participate in the recruitment process, including interviews.
• A nomination committee consisting of the chair, chief
executive and non-executive directors appoints or removes
the executive directors.
• The appointment of the chief executive requires the
approval of the council of governors.
Is there a description of the work of the nomination committee, including the process it has used
in relation to board appointments?
None
3 % None
more
14 %
more
37 %
34 %
FTSE 350 FTs
some
60 %
some
52 %
• The names of the chair and members of the nominations
Questions for the board to consider:
committee should be disclosed.
• Has the composition of the board been considered • The number of meetings and individual attendance by directors
at each should also be disclosed.
and are changes necessary to the existing board
membership? • A description of the work of the nominations committee,
including the process it has used in relation to board
• Is a review of executive remuneration policies and appointments.
service contracts required?
NHS Foundation Trust Annual Reporting Manual, Paragraphs 7.68
– 7.70
Trusts are not required to make this disclosure.
18 NHS GOVERNANCE REVIEW 2012
21. The Bribery Act 2010
Considerations
Only 13% of trusts and 2% of FTs make gifts, • It takes longer than is anticipated to respond to the
hospitality and entertainment disclosures in their Bribery Act and organisations should therefore start
annual reports. Trusts and FTs should demonstrate to respond now.
more publicly their adherence to ethical standards • If the trust has never performed a corruption risk
and the requirements of the Bribery Act. assessment it may require external help to understand
the unique risks involved.
Corruption risk through involvement in large scale
• Policies and procedures should be introduced,
procurement and tendering needs careful management. With
revised or aligned to mitigate the risks identified.
the emphasis on localism and out-sourced service provision
new relationships are continually being forged between • Training of staff most exposed to corruption risk is
NHS organisations and a range of third and private sector essential.
organisations. • Finally, keep a record of all you do in responding to
In our experience, management and oversight of gifts and the Act.
hospitality is an area that the NHS could improve upon. The
first conviction under the Bribery Act in November 2011,
where a public sector employee was jailed for six years after
admitting he received a £500 bribe, serves as a reminder for Questions for the board
NHS bodies to review their arrangements.
While there is no requirement for trusts and FTs to make
a disclosure in the annual report, gifts and hospitality for • Has the board prepared a strategy for responding to the
public officials is a hot topic, particularly in the light of the Bribery Act?
Bribery Act. In this context, it was noticeable that no FT or • Is there one individual within the trust responsible
and trust set out in its annual report their policy for gifts and for implementing the requirements of the Act,
hospitality and only a very small number declared the value investigating reports of possible corruption?
of gifts, hospitality and entertainment received by senior • Have we performed a Corruption Risk Assessment
staff and clinicians. FTs and trusts could better demonstrate (CRA)?
through the annual report their adherence to the strong
ethical standards expected of public sector employees. • Are policies and procedures for our anti-bribery
strategy aligned to the CRA?
• Do our policies and procedures fully address
Does the trust disclose the value of gifts,
facilitation payments, gifts, entertainment,
hospitality and entertainment received by its
corporate hospitality and charitable donations
staff/senior management?
on a global basis?
• Do we clearly and regularly communicate the trust’s
strategy and policies on anti-bribery and corruption
to all staff, including clinicians and contractors?
• Is there an anti-corruption training programme for
13%
Trusts
the board, all managers and staff?
• Do we have an effective compliance monitoring
programme, which provides the requisite assurance?
2%
FTs
NHS GOVERNANCE REVIEW 2012 19
22. NEDs and governors
NEDs
NEDs do not comprise the majority of board At least half of the board (excluding the chair) is
comprised of independent non-executive directors
members for 41% of FT boards and 33% of
trust boards.
80% 67%
The National Health Service and Community Care Act of
1990 introduced the requirement for every trust to have non-
executive directors.
FTSE 350 Trusts
Since the Higgs Report in 2003 it has been a requirement,
and in practice since 2006, that the number of Non-Executive
Directors (NEDs) in FTSE 350 companies has generally
exceeded the number of Executive Directors (EDs). Currently,
the average FTSE 350 board has 5.3 NEDs and three EDs; a
59%
clear non-executive majority.
The absence of such a NED bias potentially weakens the
independent input and challenge that they bring.
In addition, trusts and FTs routinely fail to explain the FTs
respective roles of voting and non-voting directors. On average
there are between one and two further non-voting EDs on the
board who can still influence debate.
The balance of power in many trusts and FTs does not Except for smaller companies at least half of the board,
favour NEDs. Trusts and FTs should examine the make-up excluding the chairman, should comprise non-executive directors
of their boards to ensure an appropriate balance and that determined by the board to be independent.
the impact and implications are properly reflected in their
Combined Code, A.3.2
governance arrangements and the annual report.
Although the requirement differs slightly for trusts and FTs, At least half the board of directors, excluding the chairman,
with at least half the board needing to be comprised of NEDs, should comprise non-executive directors determined by the board
41% of FTs and 33% of trusts go no further than half. In some to be independent.
trusts and FTs, NEDs are in the minority.
The NHS Foundation Trust Code of Governance
In most NHS organisations, governance is the responsibility of
a unitary board, with at least half the board, excluding the chair,
made up of independent NEDs.
The Healthy NHS Board
Board Average numbers Average NEDs Average voting Average non-voting Chair
composition on the board executive directors executive directors
FTs 13.0 5.5 5.3 1.2 1.0
Trusts 13.2 5.1 5.3 1.8 1.0
20 NHS GOVERNANCE REVIEW 2012
23. How well do trusts and FTs describe the
consideration of independence of its NEDs?
“A non-executive director is expected to bring his
or her experience and an external viewpoint in order more
None
to assist and, where necessary, challenge the board 27 %
30 %
of a company, making sure that board decisions are
balanced and not dominated by a single, or small
group of, executive directors. The non-executive FTs
director is expected to be independent of mind and
rigorous in his or her analysis.”
The Institute of Chartered Accountants of Scotland
While the importance of NED independence is understood some
as a concept, too many trusts (55%) and FTs (30%) fail to 43 %
state that NEDs (remunerated by the trust) are independent.
This, combined with, in many cases, the NEDs not being in
the majority may result in them not being effective in their
more
independent challenge role.
It is essential, therefore, that trusts and FTs clearly explain 12 %
the independence of NEDs, the balance and composition of the
board, and how they can continue to operate effectively.
Trusts
some None
33 %
55 %
The board should identify in the annual report each non-executive
director it considers to be independent.
Combined Code, A.3.1 and NHS Foundation Trust Annual
Reporting Manual, Paragraph 7.57
NHS GOVERNANCE REVIEW 2012 21
24. NEDs and governors
NEDs need to be well informed about the trust or FT and
the external environment in which it operates, with a strong The effective NED:
command of relevant issues. A NED should insist on a
comprehensive, formal and tailored induction. An effective • upholds the highest ethical standards of integrity
induction need not be restricted to the boardroom and and probity
should include visiting wards and meeting clinicians and
• supports executives in their leadership of the
managers. Once in a post, effective NEDs should continually
business while monitoring their conduct
seek to develop and refresh their knowledge and skills to
ensure that their contribution to the board remains informed • questions intelligently, debates constructively,
and relevant. challenges rigorously and decides dispassionately
An element of the role of the NED is to understand the • listens sensitively to the views of others, inside and
views of major stakeholders both directly and through the outside the board
chair and the senior independent director.
• gains the trust and respect of other board members
• promotes the highest standards of corporate
The role of the NED governance.
Strategy
• Constructively challenging and helping develop
proposals on strategy.
Performance
• Scrutinising management performance in meeting
agreed goals and objectives.
• Monitoring the reporting of performance. “Non-executive directors are appointed by the NHS
Appointments Commission on behalf of the local
Risk
community. They therefore have a responsibility
• Satisfying themselves on the integrity of financial
to ensure the Board acts in the best interests of the
information and that financial controls and systems of
public and is fully accountable to the public for the
risk management are robust and defensible.
services provided by the organisation and the public
People funds it uses.”
• Responsibility for determining appropriate levels of
remuneration of executive directors. Governing the NHS: a guide for NHS trusts – Department of Health
and the Appointments Commission
• Appointing, and where necessary removing, executive
directors and succession planning.
22 NHS GOVERNANCE REVIEW 20112
25. Is it disclosed that the terms and conditions Is it stated that the board (of governors) set the
of appointment of non-executive directors are remuneration for the non-executive directors?
available for inspection?
64 % 36 % 94% 77%
FTs FTSE 350 FTs
FTSE 350
14%
Trusts
The terms and conditions of appointment of non-executive
directors should be made available for inspection.
Combined Code, A.4.4 and The NHS Foundation Trust Code of
The council of governors is responsible for setting the
Governance remuneration of non-executive directors and the chairman.
NHS Foundation Trust Code of Governance
Greater accountability around terms and conditions is Stakeholders, whether they are the council of governors,
required, with only 36% of FTs and 14% of trusts making commissioners or taxpayers, should be assured that a FT’s
such information readily available. remuneration policy is linked to public accountability and
Given the challenges facing the NHS, FTs and trusts need sustainability. Of our sample, 77% of FTs state that the board
to demonstrate, and stakeholders need to know, that NEDs confirmed the remuneration of their non-executives. (The
are playing a strong role in holding the board to account and Secretary of State for Health is responsible for setting the
ensuring that the best use is being made of taxpayers’ money. levels payable to chairs and NEDs of trusts.)
The remuneration committee is responsible for setting
executive pay. It should protect the public interest when
Good practice points setting remuneration and have due regard to performance
metrics that are fair, transparent and linked to the overall
performance and strategy of the trust.
• Explain the value your NEDs bring, don’t just list
their experience.
Average annual salary Trust FT
• Clearly describe how NEDs maintain their
Non-executive director £7,120 £11,803
independence.
Chair £22,935 £40,324
• If less than half the board comprise NEDs,
acknowledge this as a risk and explain how this will There is a clear increase in remuneration for NEDs and
be managed. chairs on conversion to FT status, reflective of the increased
• Explain how NEDs hold the board to account, responsibilities for, and expectations of, the postholders.
what committees they attend and how often. However, NHS NED remuneration is still significantly
• Explain the relationship between NEDs and the below that of the FTSE 350 equivalents.
council of governors.
• Clearly show how executives’ performance is
appraised.
NHS GOVERNANCE REVIEW 2012 23
26. NEDs and governors
Do the governors (non-executive directors
The chair in a company) meet without the chair at least
annually to appraise the chair’s performance?
Trusts and FTs need to describe better who sits
80% 43%
on key committees and perform an effectiveness
review of their arrangements for the appraisal of
individual board members. FTSE 350 FTs
Trusts and FTs usually set out in their annual reports details
about their chair, chief executive and directors. However, this
is often little more than an ‘identity parade’, and 25% of FTs
* Not applicable to trusts
and 34% of trusts failed to clarify the members and chairs of
the nomination and remuneration committees.
Does the report identify the chair, the deputy
chair (where there is one), chief executive, senior
independent director, members and chairs of the
nomination, audit and remuneration committees? Led by the senior independent director, the non-executive
directors should meet without the chairman present at least
FTSE 350 FTs Trusts annually to appraise the chairman’s performance.
98% Combined Code, A.1.3 and the NHS Foundation Trust Code of
75% Governance
66%
* A trust chair is appraised by the SHA chair. See page 25.
Of those FTs that do appraise the chair’s
• The names of the Chairman and Chief Executive.
performance, how much detail is provided on the
• The composition of the management board (including advisory
process?
and non-executive members) having authority or responsibility
for directing or controlling the major activities of the entity
during the year.
more
Department of Health Manual for Accounts 2010/11 Chapter 2,
Paragraph 2.9 10 %
• The name(s) of the person(s) occupying the position of chair,
deputy chair (where there is one) and senior independent some
director during the year, the date of their appointment and how
long the appointment is for.
30 %
FTs
• The name(s) of the person(s) occupying the position of chief
executive and the composition of the board of directors during None
the year.
• The names of the non-executive directors which the board
60 %
considers to be independent, with reasons where necessary.
NHS Foundation Trust Annual Reporting Manual, Chapter 7,
Paragraph 7.57
An explanation of methods used to assess whether performance
conditions were met and why those methods were chosen.
NHS Foundation Trust Annual Reporting Manual, Paragraph 7.29
24 NHS GOVERNANCE REVIEW 2012
27. The chair is responsible for board effectiveness and their Of those that do appraise the chief executive’s
leadership is a key indicator of good governance. In some performance, how much detail is provided in the
trusts and FTs the chair appraises all board directors, which annual report on the process?
is good practice. However, the role of the chair, and their
relationship with the board and non-executives, is often poorly FTs Trusts
described in annual reports. None 69%
85%
This role influences strategy and management and
therefore its performance, and how this is measured, is an Some 21%
indicator of a FT or trust’s success. A trust chair is appraised 11%
by the SHA’s chair, although 2% of trusts performed their More 10%
own internal appraisal. We would like to see this extended 4%
further, with trusts taking greater accountability over their
future and individual performance, particularly in preparation Usually, the chair appraises the chief executive’s
for the abolition of SHAs from 2013. performance. However, given the proximity of their
working relationship, the involvement of NEDs would
bring a wider perspective to the review, avoiding a
The chair’s statement should: perception of an internally focused and narrowly based
perspective.
• state the governance objectives and focus of the board
for the coming year
• emphasise the importance of governance to the health
sector and state their personal responsibility for the
smooth running of the board
• discuss board evaluation outcomes and resultant
actions, such as long-term succession planning or
increased training
• set out what they see as the key features of
governance.
non-executive directors (or Governors) meet
without the chief executive at least annually to
appraise the chief executive’s performance
22% 2%
FTs Trusts
The board should state in the annual report how performance
evaluation of the board, its committees and its individual directors
has been conducted.
Combined Code, A.6.1
NHS GOVERNANCE REVIEW 2012 25
28. NEDs and governors
Governors
Half of FTs provide only ‘boilerplate’ descriptions of the role of governors, reflecting a residual
lack of clarity from FTs around how to maximise the effectiveness of their governor input.
Monitor is placing increasing importance on the role, and its Does the ft describe the role of governors?
expectation, of governors to hold FTs to account. It therefore
becomes increasingly important for FTs to demonstrate
how governors have fulfilled their role during the year.
Unfortunately, many (46%) use ‘boilerplate’ descriptions of
NONE
the role of governors.
Broadly, the governor role involves representing the local 2%
areas served by the FT, appointment of the chair and holding
the board to account through the chair.
Monitor’s ‘Survey of NHS Foundation Trust Governors
2010/11’ shows a significant expectations gap between what
governors see as their role compared to the views of chairs
and chief executives. MORE
FTs SOME
The actual role of the council of governors is still not
clearly defined or understood in some FTs. There are pockets 52% 46%
of good practice, but, based on our own experience and
that presented in Monitor’s 2010/11 survey of governors,
how this group holds a board to account is sometimes
unclear. We discussed these difficulties in our handbook
‘Finding your bearings: A governor’s guide to Monitor’s
audit code for NHS foundation trusts’ where we provided
question prompts to help governors better understand their
accountability role.
The annual report should include a statement of how the board
Average number of governors Average of directors and the board of governors operate, including a
FTs 31 high-level statement of which types of decision are to be taken by
each of the boards.
Meetings of the council Average Highest Lowest NHS Foundation Trust Annual Reporting Manual, Paragraph 7.52
of governors
FTs 5.0 9.0 3.0 The report should include a statement about the number of
meetings of the board of governors and individual attendance by
governors and directors.
NHS Foundation Trust Annual Reporting Manual, Paragraph 7.54
26 NHS GOVERNANCE REVIEW 2012
29. An average FT has 31 governors attending 76% of If managed well, the council of governors can
the five council of governor meetings each year. be a valuable tool, to enhance governance and
This is a large number of people and managing accountability to the local population.
the council of governors, including elections and
meetings, is costly, in terms of both time and
FTs should invest more time in ensuring that
money. To engage with governors, FTs sometimes
they are maximising the effectiveness of their
invite them to attend board committees. However,
governor input.
these can turn into debate on the topic matter
rather than helping the governors to discharge
their responsibilities for assessing the performance
of the board.
We therefore suggest FTs, and aspiring FTs, ask
themselves:
• is the cost of servicing our existing council
of governors, including any subcommittees,
commensurate with the contribution they
currently make?
• are we clear about the role of governors and
does this match governors’ perception of their
role?
• are we doing enough to attract and retain those
governors that would add real value to the
trust?
• what can we do with the existing council to
bring quality and expertise to the fore?
NHS GOVERNANCE REVIEW 2012 27
30. Risk and performance
Principal risks
Trusts and FTs need to improve their principal the annual report includes a statement that
risk reporting in the annual report. 23% of there is an on-going process for identifying,
evaluating and managing the significant risks
trusts and 10% of FTs fail to describe the risk
faced by the organisation
management process, while 45% of trusts and
13% of FTs make no mention of the principal
risks.
99%
In the fallout of the initial financial crisis in the banking FTSE 350
sector, private companies were heavily criticised for the poor
information on risk, and sensitivity to risk, included in their
annual reports. We are in the midst of substantial change in
the NHS and it is essential that trusts and FTs take on board
the lessons learnt from the corporate sector and ensure that
sufficient disclosure is made on the process they have used to
identify, evaluate and manage significant risks.
While the best trusts and FTs provide a joined-up picture,
90% 77%
linking strategy to risk and response, our findings indicate
that trusts and FTs need to better describe how they are
managing risks with more detail on those that are more
significant.
FTs Trusts
Trusts need to agree their risk appetite, explain their exposure
to risk and how this may change as a result of changes to
strategy and the operating environment.
The board should, as a minimum, disclose that there is an on-
going process for identifying, evaluating and managing the
significant risks faced by the company, [and] that it has been in
place for the year under review.
Turnbull Report, 1999, paragraph 34
28 NHS GOVERNANCE REVIEW 2012