Scandal-hit trust moved to change auditor when accounts were challenged, report suggests

As reported by HSJ last week, an investigation is ongoing around a £46m hole that was discovered in University Hospitals Leicester Trust’s annual accounts for 2018-19.

Those accounts were signed off as giving “a true and fair view of the financial position” by external auditor Grant Thornton. But in its audit of the 2019-20 accounts, published in the trust board papers today, the firm has described its relationship with the trust during that period.

The new audit report says: “During our period as auditors we have needed to challenge management on numerous occasions. Our challenge, until recent changes in management, has not been welcomed.

“In particular, we note that our challenge resulted in management taking a private report to the audit committee in July 2019. The report commented on the audit approach taken and detailed nature of the evidence requested.

“The report made the following recommendation ‘The trust via its Audit Committee will have to take a view on its relationship with Grant Thornton if/when it reviews the contract for audit services’. This view was accepted by the audit committee and the contract was retendered in December 2019.”

However, the trust appointed a new chief financial officer in December 2019 and Grant Thornton appears to have retained the contract.

It has refused to sign off the 2019-20 accounts, which has led to what the National Audit Office described as an “unprecedented” failure by the trust to submit accurate final accounts.

HSJ has asked the firm to comment specifically on its audit of the 2018-19 accounts, but has yet to receive a response.

As reported on Friday, the trust’s former chief executive and chief financial officer have been referred to the Care Quality Commission under the ‘fit and proper person’ process.

The latest Grant Thornton audit added that it had received “anecdotal evidence” that trust management may have “deliberately misreported the trust’s financial position” and of “potential collusion with other NHS commissioners”. It did not offer further details on these points.

The report said the firm had challenged the trust’s financial statements in each of the last three years, saying they had “been of a poor quality and have contained significant errors”.

It added: “Transactions have been processed outside of the ledger and the accounts have not reconciled to supporting financial systems…

“We remain of the opinion that the finance team is not ‘fit for purpose’ and requires investment to both increase its capacity and to ensure that it has the skills needed in a complex financial environment.”

It said Deloitte had been appointed to help prepare revised financial statements for 2019-20.

Kiran Jenkins chaired the audit committee for the period in question until Michael Williams took over in September 2020.

The report said there had been pressure on the trust to improve its finances, with “control total” targets issued by regulators.

The trust said in a statement: “A review of the trust’s balance sheet was initiated in response to these concerns and this work identified further significant technical accounting issues in the draft 2019-20 accounts; as a consequence the trust board is not prepared to sign off the draft accounts as ‘true and fair.’”

Grant Thornton continued as the trust’s external auditor for the 2019-20 accounts, having been appointed on a three-year contract covering the 2017-18, 2018-19 and 2019-20 accounts.