House of Commons - Public Accounts

Select Committee on Public Accounts Sixty-Second Report

THE PURCHASE OF THE READ CODES AND THE MANAGEMENT OF THE NHS CENTRE FOR CODING AND CLASSIFICATION

THE WEAK OVERSIGHT OF THE NHS CENTRE FOR CODING

34. When they established the Centre for Coding and Classification in April 1990, the NHS Executive set up lines of control and accountability. The NHS Executive established a Supervisory Board to oversee the operation of the Centre, with a chairman appointed by the Secretary of State for Health and a membership drawn from the clinical professions and the NHS Executive. Members included the Executive's Director of Finance and the Executive Director of the Information Management Group.[37] However, the Executive did not adequately define the arrangements. In particular, they did not make clear that the host health authority (Trent Regional Health Authority until April 1995 and subsequently Leicestershire Health Authority) would be supreme in employment matters.[38]

35. In his report, the Comptroller and Auditor General highlighted a number of concerns about the way the Centre had been run, including:

Use of inappropriate personnel management practices in relation to self-employed individuals;[39]

Failing to invite competitive tenders for external consultancy services;[40]

Paying £128,000 in lieu of notice to one individual without trying to negotiate a lower settlement;[41]

Using inadequate recruitment procedures;[42]

Not subjecting pay rates at the Centre to formal job evaluation;[43]

Allowing some employees to be homebased when this arrangement showed no quantifiable benefit to the Centre;[44]

Shortcomings in the financial controls, including lack of segregation of duties, the possible loss of £23,000 of computer equipment, and double payments to Dr Read for use of a car.[45]

36. In the light of these failings, the Committee asked the NHS Executive what advice they gave Dr Read on how he should run the Centre. They told us that the advice given to Dr Read by his line manager had been very weak, and not properly documented. There had been confusion over accountability and the locus on key employment matters. They accepted that this was a management failing that lay squarely with the NHS Executive.[46]

37. We asked Dr Read for his assessment. He told us that he had received some advice when the Centre opened but that, when they had to recruit a lot of staff, Trent Regional Health Authority could not provide them with the services they needed.[47] Dr Read told us that the minutes of the Supervisory Board had repeatedly made the point that the Centre were very concerned that they were not getting the advice they should have had from Trent Regional Health Authority.[48]

38. We asked the NHS Executive how it was that they had taken no action in response to the Supervisory Board minutes. They told us that they had no knowledge of any transfer of information from the Supervisory Board through the Chief Executive to ministers. It was now clear that the Board had no teeth; and that it could not be defined as being in the chain of public accountability. They accepted that this was another flaw in the arrangements they had set up.[49]

39. The Executive told us that they first became aware that something was going wrong with the management of the project when the matters were raised in management letters from the National Audit Office in September 1996.[50] Since then, they had begun to take action to address many of the issues raised in the C&AG's report. Their guidance on important questions of regularity and propriety were clear. And, in the light of this case, they proposed to write to every chief executive in the NHS, drawing to their attention the problems that have been identified.[51] They could not, however, guarantee against failure.[52]

40. Finally, the Committee asked the Executive whether they had looked at Dr Read's business experience to determine his abilities to run a company. They told us that they had seen no evidence that his business acumen was properly tested at the time. Their main focus had been on the question of intellectual property and Dr Read's attributes as the inventor and the man who could help them develop the Codes.[53] Dr Read told us that he had been a general practitioner for most of his employment, and had had five years as a part time executive of Abies Informatics Ltd, a software company.[54]

Conclusions

41. The catalogue of failings in the management of the NHS Centre for Coding and Classification, as set out in the C&AG's report, is serious. It includes:

Serious weaknesses in personnel management arrangements;

Failure to invite competitive tenders for external consultancy services;

Shortcomings in financial controls; and

Arbitrariness in setting pay levels.

It is unsatisfactory that the NHS Executive only became aware of the serious nature of the problems at the Centre when the National Audit Office wrote to them. The Executive's lack of knowledge of these weaknesses demonstrates graphically the in-effectiveness of the arrangements for overseeing the Centre.

42. Given the scale and importance of the Read Codes project, we are astonished that the NHS Executive did not put in place strong support and oversight arrangements from the outset and failed to recognise the seriousness of the conflict of interest. In neglecting these essentials they put substantial sums of public money at risk. We expect the NHS Executive to ensure that arrangements are in place throughout the NHS to prevent and identify quickly management failings of the type identified in the C&AG's report.

37 C&AG's report, (HC 607 of Session 1997-98), para 1.34 and Appendix 3 Back

38 ibid, para 3.3 Back

39 ibid, para 3.6 Back

40 ibid, paras 3.11-3.12 Back

41 ibid para 3.15 Back

42 C&AG's report, (HC 607 of Session 1997-98), para 3.23 Back

43 ibid, para 3.26-3.27 Back

44 ibid, para 3.29 Back

45 ibid, para 3.33-3.40 Back

46 Qs 158-163 Back

47 Q161 Back

48 Q163 Back