The appointed external auditor has issued a report under Section 8 of the Audit Commission Act (commonly known as a public interest report). The report sets out the appointed auditor’s serious concerns about the financial position of the Trust.
Rob Bennett, on behalf of the appointed auditor, PricewaterhouseCoopers LLP, said:
“The Trust, which has an accumulated deficit of £22.9m at 31 March 2007, does not have a plan to recover this deficit by 31 March 2009 in order to meet its statutory breakeven duty. The deficit is expected to be £38.7m at 31 March 2008. The Trust needs, as a matter of urgency, to work with the Department of Health, the East of England Strategic Health Authority and its commissioners to identify and implement a solution which will enable it to achieve its statutory duty”.
The report shows that:
- The financial position of the Trust has deteriorated significantly over the last three years. The reported deficit has increased from £1.8m in 2004/05 to £22.9m in 2006/07.
- Whilst the Trust initiated its own financial turnaround process in the summer of 2006 and this delivered cost improvements of £4.2m in 2006/07, these savings were not sufficient to enable the Trust to break even in 2006/07.
- In early 2007, Cambridgeshire Primary care Trust (PCT) started a consultation exercise in respect of the future services at Hinchingbrooke. The results of the exercise were reported in July 2007 and the preferred option was for redesign of the hospital’s services based on reduced levels of activity.
- During and following the consultation, the Trust has been working with Cambridgeshire PCT to enable planning to take place to show the future shape of services, use of the current site and workload and financial estimates. This work represents the “Sustainable Hospital Project”.
- The Trust has also updated its financial recovery plan with the primary objective of stopping any further deterioration in its in-year financial position. The Trust does not currently have a plan to address its cumulative deficit which at the time of preparing the public interest report is estimated to be £38.7m at 31 March 2008. The Trust has a statutory duty to break even, taking one year with another and recoup the cumulative deficit by 31 March 2009.
- The Trust received temporary Public Dividend Capital of £27.3m in 2006/07 in order to strengthen its cash position. At the time of writing the report, the latest cash flow forecast showed that the Trust will need further significant cash support at 31 March 2008.
The report notes that whilst the Trust Board has been taking appropriate action to improve the financial position, given the scale of the projected cumulative deficit at 31 March 2008 and the absence of a plan to recover it, the Trust will be unable to achieve this element of its statutory breakeven duty by 31 March 2009 without external support. The Trust, working with the Department of Health, East of England Strategic Health Authority and its commissioners, needs to identify and implement a solution that will enable it to achieve its statutory breakeven duty by 31 March 2009.
- The report, also recommends that the Trust should:
- Deliver savings in line with plans and timetable.
- Continue to monitor all categories of income and expenditure and where necessary, reduce them in line with anticipated reductions in activity.
- Determine the shape of future hospital services and their related budgets by finalising work on the Sustainable Hospital Project.
- Update the existing Financial Recovery Plan in the light of the above and any of the detailed recommendations that remain to be addressed to ensure that it satisfactorily addresses the need to recover the Trust’s cumulative deficit.
In the event that a significant deficit remains at 31 March 2009, the Strategic Health Authority will need to find a resolution for this deficit or address the impact on any successor body.
The full Pulic Interest Report for Hinchingbrooke can be downloaded here.