Charity Commission disputes Department of Health ruling on NHS charities’ accounts

According to an article in ThirdSector (27 October 2009), The Charity Commission appears to be heading for a showdown with the Department of Health (DH) over accounting procedures for NHS charities in England and Wales.

Senior Department of Health official Janet Perry has told health authorities that any NHS body that is the sole trustee of a charity must move that charity’s assets onto its own balance sheet.

Her position relies on a recently introduced international public accounting standard that says public sector bodies must consolidate the accounts of any organisations they control that have an income above a certain level. The DH estimates this to be about 30 of the 282 NHS charities that have NHS bodies as sole corporate trustees.

But the Commission is planning to write to the health authorities telling them they must not consolidate NHS charities’ accounts. Its official guidance says it is “wholly inappropriate” that charitable funds should ever appear on the balance sheets of public sector organisations, because it gives the impression that charitable assets are controlled by government.

Nick Brooks, head of not-for-profit at accountancy firm Kingston Smith, called the DH position “accounting dogma gone barking mad”. He said: “Consolidation should occur only if there is ownership. If you would not own the funds if the other organisation was wound up, you should not consolidate those funds into your own accounts.”

Jonathan Brinsden, a partner at specialist charity law company Bircham Dyson Bell, said he believed the commission was right to take a stand against the DH, but that corporate trustees would now be left in an invidious position.

“If I was in this situation, it would be impossible to know which authority to listen to,” he said. “Nor do I know how this conflict can be managed.”

A spokeswoman for the Commission said: “We don’t agree with the interpretation in the Department of Health’s letter. We will be following up with the Department of Health on this issue accordingly, and will also be writing to strategic health authority directors of finance to make our position clear.”

Source: ThirdSector – click here.

“Efficient use of resources and good quality services go hand in hand” – new finance guide for doctors

The Audit Commission and Academy of Medical Royal Colleges have published A guide to finance for hospital doctors.

In the publication, they state that ”there are many examples where clinicians have led change and improved services, through taking greater responsibility for managing the money available to them. This is not about focusing on cost and cost alone, but how best money can be used to improve the quality of care, combining operational and clinical effectiveness. Efficient use of resources and good quality services go hand in hand.”

Healthcare Governance Review believes that the guide, whilst written for doctors, may be of interest to board members and managers.

Download A guide to finance for hospital doctors here.

Health Committee reckons ‘FTs have some proven strengths, but much is unknown’

The House of Commons Health Committee has published a short report on Foundation Trusts (FTs) and Monitor.

The report finds that FTs have some proven strengths. They have performed well financially and generated surpluses. They have been high performers in routine NHS process quality measures. However, much is unknown. With a lack of objective evidence, it is not clear whether their high-performance is the result of their changed status, or simply a continuation of long term trends, since the best trusts have become FTs.

Key aims of FTs were the promotion of innovation and greater public involvement. While the Committee was provided with examples of good practice in both of these areas, again there was a lack of
objective evidence. 

In relation to public involvement, while the Committee saw some examples of good practice in FTs’ new governance arrangements, in general they seem to be slow to deliver benefits and despite numerous small studies, there remains a lack of robust evidence of their effectiveness. The governance process currently costs circa £200,000 per trust, giving a total of around £20 million per annum. We recommend that the Department of Health make it a priority to evaluate rigorously the FT governance system and to give guidance on best practice so that public money as well as members’ and governors’ time can be used as effectively as possible to improve services.

The Committee also found that while FTs do not appear to have yet exploited the full potential of their autonomy, witnesses from FTs told them that the ability of boards to make decisions more quickly was important and made a ‘tangible’ difference to the dynamic of their organisations. Unfortunately, concerns persist about what level of Government intervention in FTs’ affairs is legitimate, and the Government must clarify what the appropriate levels of intervention are.

Finally, the Committee found that Monitor’s application process and regulatory regime seems to be well regarded. However, a complex regulatory environment of other organisations also surrounds FTs, and in particular there is potential duplication between the Healthcare Commission and Monitor both of which evaluate the quality of FTs’ services.

Download the Health Committee report Foundation trusts and Monitor here.

‘Credit crunch’ could see government ‘raiding’ foundation trust surpluses

The Guardian newspaper last week ran a short article looking at How the financial crisis will affect the health service.

The ‘credit crunch’ is biting and is likely to squeeze public expenditure. Consequently, according to Professor Robert Harris at Monitor, “Foundation trusts need to budget for lower income streams.” He says that ”Many are in a good position because they have made efficiency savings. They should try to insulate themselves by investing in a service they are good at to attract more custom in the future.”

Chris Ham, professor of health policy and management at Birmingham University, is concerned that the government may attempt to claw back surpluses that the government has encouraged them to build up for future investment in patient care. He advises boards to take ”every possible step” to protect their surpluses, including spending them to avoid them being raided by Treasury.

Bromley Hospitals NHS trust publishes independent financial management and governance review report

According to Bromley Hospitals NHS trust’s latest annual report, “2007/08 has been a difficult and challenging year for the Trust.”

The year ended with a deficit of £17.9million. This, together with an £87M accrued cash debt, resulted in Bromley becoming one of the 17 most financially challenged Trusts in the country.

The current trust board, in an attempt to “demonstrate public accountability” for historically poor financial performance, commissioned an independent review of financial management and governance. The review report states ”The Trust Board was ineffective, until 2007, in scrutinising the financial information provided. This led to a series of failings in the financial management and high-level governance of the Trust.”

As a result, until 2007/8 the review finds that “the Trust Board did not meet its conjoint responsibilities for effective clinical care and effective financial management, favouring the former at the expense of the latter. Insufficient attention was paid to the many early warnings received by the Trust Board about its worsening financial position.”

The extent to which the report attempts to leave no stone unturned is summed up by its author, Michael Taylor, thus: “This Review has revealed various and serious failings. I recognise that many of the findings will be unpalatable to some recipients of this Report. I fully expect that attempts will be made by certain parties to distance themselves from the findings, find faults with my interpretation of the evidence, or the methodology for the progression of the Review.”

The report is extensive at 156 pages plus a total of 30 appendices. There is undoubtedly much than can be learned from Michael Taylor’s review that can be translated into lessons for other trust boards. The report and its appendices can be downloaded here.

It is interesting to note that former CEO at Bromley, John Watkinson, whilst being applauded for his concerns for patient care, is nevertheless accused of having breached certain provisions within the NHS Code of Conduct and Accountability. Mr Watkinson left Bromley at the end of 2006 to become CEO at the troubled Royal Cornwall Hospitals Trust (RCHT). He is apparently now on extended leave from RCHT pending an investigation into its governance and financial management. For further information, click here.

UPDATE 22 MARCH 2009 – Readers might like to download a document presented to the board of the Royal United Bath NHS Trust in January 2009 that demonstrates how that particular trust has addressed the issue of learning from the Bromley report. Click here.

Monitor intervenes following financial governance failings

Monitor, regulator of NHS foundation trusts, has used its statutory powers to intervene on a “financial governance” matter following a “significant failure” by the Royal National Hospital for Rheumatic Diseases  foundation trust to comply with its terms of authorisation.

The “significant failure” relates to a “requirement for a restatement of the Trust’s accounts for 2006/07, reflecting an increase in losses from £40k to £650k, and further significant operating losses in 2007/08.”

The Trust “delivered financial losses over the period from April 2006 to March 2008, the full extent of which were not brought to the attention of the Trust Board or disclosed to Monitor until June 2008, following re-statement of the Trust’s accounts by the external auditors.” The trusts financial risk rating has, as a consequence, droped to ‘1′ – denoting the highest level of financial risk.

In taking action, Monitor recognised that “…[the Chair and his] non-executive colleagues are largely new to the role over the last six months, and that one non-executive is shortly to take up their position.”

Monitor also stressed that they had “….no concerns as to the quality of the clinical care provided by the Trust to its patients” and that the failings “….should not be construed as providing any comment as to the capabilities and competencies, or otherwise, of the Trust’s Board or the executive team, or of Monitor’s confidence in them.”

For further information, click here.

In Alberta, Canada, new “super health board” signs contract banning financial defecits

In Canada, Alberta’s health minister, Ron Liepert, is setting up the province’s multibillion-dollar health care delivery system to run like a corporation to cut waiting times and control spiralling costs.

According to Mr Liepert, “[Corporation is] not a dirty word. Three-and-a-half million Albertans are shareholders in this corporation and I want to ensure that they get the best return on their investment.”

Ken Hughes, the former insurance executive chosen as chairman, will be required to sign a performance contract that assures the new health board will keep spending within a limit set by the government

For further information, click here.

Update 21 May 2008 – Not everyone feels that a unitary ’super board’ is the way forward. Click here.

Audit Commission’s latest ‘Financial Health News’ announces forthcoming study on ‘board assurance’

The latest edition of the Audit Commission’s Financial Health News (FHN) – which provides health sector professionals with essential financial health management information, updates on the Audit Commisions’s current work and new national reports, together with editorials about the Commission’s audit work with NHS trusts and Foundation Trusts – contains a number of interesting articles, including:

- update on implementation of Payment by Results (PbR)
- a practical guide to improving medium-term financial planning for PCTs
- Emerging findings from the PbR assurance framework
- Notification of new health studies programme for 2008/09

The new health studies programme will include Board Assurance. According to the Audit Commission, “This study will assess the rigour with which NHS trust and NHS FT Boards assure themselves on the strength of the internal controls to support the accounting officer’s Statement of (sic) Internal Control and therefore the validity of the self assessment and self certifications for regulatory purposes. It will also review the steps Boards take to assure themselves about its quality and the data they receive.”

Current and past issues of FHN can be freely downloaded at the Audit Commissions’s website here.

Dealing with ineffective governance in NHS Scotland – the case of Western Isles Health Board

An interesting case study involving the Western Isles Health Board - part of NHS Scotland – in what appears to be a classic case of ineffective NHS governance; and the mechanisms in place to hold senior figures to account.

In essence, the Auditor General (AG) for Scotland produced a Section 22 report on the Health Board following its failure to meet a financial target. This was the third consecutive year the AG had prepared a report on the accounts of the Board. His report points to “a number of serious weaknesses concerning the Board’s corporate governance arrangements.”

His report also states that “The Board has no comprehensive performance management framework in place and corporate objectives were not agreed during 2006/07. There is no committee to oversee performance and no system in place to record and report benefits from pay modernisation. Furthermore, a recent report by NHS Quality Improvement Scotland on clinical governance identified some significant failings, including a lack of clear strategic priorities and a lack of performance monitoring.”

Follow the inquiry into the Section 22 report on Western Isles Health Board here.

UPDATE – Western Isles Health Board has issued a statement saying that it has now achieved financial balance. Read the statement here.
 

New guides to help non-executives with NHS accounts

The Healthcare Financial Management Association, in partnership with the Audit Commission, has published three guides for non-executives to help them get a more detailed grasp of their annual accounts.

Even for those with a strong background in accounting, some aspects of NHS finance can be immensely complicated. These guides have been written especially for non-executive directors with limited financial expertise to help them understand NHS accounts. They explain the role and responsibilities of non-executive directors and auditors in the accounting process.

The three guides, which are free, look at the annual accounts for:

- NHS trusts;

- primary care trusts; and

- foundation trusts.

Download the guides here.

 

Achieving financial excellence for NHS boards

In light of increasing clinical and financial demands, the Association of Certified Chartered Accountants (ACCA) and the NHS Confederation have developed an intensive practical training programme that will equip individuals on NHS boards with the key skills that they need to effectively discharge their responsibilities. The 2 day event, titled ”Achieving financial excellence for boards,” costs £790 + VAT per delegate and will be run on the following dates:

23-24 April 2008, ICO Conference Centre, London

2-3 September 2008, ACCA, London

27-28 November 2008, ICO Conference Centre

Further information on the event, including a downloadable flyer, can be obtained by clicking here.