http://www.kirklees.nhs.uk/fileadmin/documents/meetings/February_07/KPCT-07-18%20Finance%20report

KIRKLEES PRIMARY CARE TRUST

Report to the Board 28 February Finance Report 1

Purpose of this Report

This report has four principle objectives: 1. to report the financial position of the PCT and the risks associated; 2. to update the Board on Turnaround; 3. to update the Board on performance against the PCT’s other key statutory financial duties/targets.

2

Background

At its last meeting on 31 January the Board was advised that whilst the PCT was still forecasting a £5.1m deficit at the year- end, there were additional financial risks of £2.4m that would need to be managed or additional savings made if this forecast was to be achieved.

This report uses the latest current information available to update the Board on the financial position.

3

Forecast Financial Position for 2006/07

The PCT is still formally forecasting achievement of our £5.1m deficit target for 2006/07 but my judgment is that we are £700k away from achieving our target and there are risks in my assumptions.

This forecast has been provided to the Strategic Health Authority in our monthly financial report, and is based on the following assumptions: •

That all actions currently identified in the Turnaround Plan and existing cost improvement plans continue to be delivered

•

That all budget holders whose budgets are currently underspent, continue to maintain at least that level of underspend to the year end, and wherever possible increase that level of underspend to give a greater chance of achieving our forecast position

•

That those budget holders, whose budgets are currently overspent, continue to take actions to reduce that overspend.

•

That additional actions are identified and implemented to manage the net additional £0.7m of risks identified, detailed below.

The forecast particularly assumes that the SLA positions with our main acute providers, Mid Yorkshire Hospitals NHS Trust and Calderdale and Huddersfield Foundation Trust remain within forecast.

4

Financial Risks and Actions to Mitigate Risks

The finance report to last month’s Board meeting highlighted and discussed the specific risks that threatened achievement of our 31 March target. For consistency and continuity they are repeated here.

Since last month’s report there has been more positive news, thanks to the continued efforts of PCT staff and budget holders, in that the overall “worst case” scenario has continued to reduce from a £7.5m deficit to a £5.8m deficit.

As the financial year progresses, the information available to produce the finance report becomes more robust and a detailed review of all budgets as at 31st January has been undertaken highlighting, improvements in the Mid Yorkshire service level agreement trading position, improvements in the dental income forecast shortfall and other continued budget underspends.

At this stage of the year, there are fewer risks in number to the reported financial position but there remains significant scope for financial variance.

The “worst case” position is perhaps better described as my current assessment taking all known factors into account whilst acknowledging that there could still be significant change on the large spending areas, SLAs, prescribing and dental income.

Whilst the continued improvement in the financial position is welcome there remains work to do to achieve our target and risk that the position could worsen. Until 31 March we must all continue to strive to minimise expenditure and maximise income.

Previous report £m

Current

Reported Target Financial Outturn at 31 March 2007

5.1 deficit

5.1 deficit

Additional Financial Risks Identified 2006/07 (see below)

7.1 deficit

6.1 deficit

4.7 surplus

5.4 surplus

7.5 deficit

5.7 deficit

£000s 1,660 1,441 317 2,923 769 7,110

£000s 1,660 1,208 (412) 2,923 769 6,148

Mitigating under spends (see below) “Worst Case” Financial Outturn 2006/07

Additional Financial Risks Reduction in central allocations Dentistry Mid Yorkshire Trust Specialist Services Other risks Total

£m

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Mitigating Under Spends Prescribing under spend Other forecast under spends Market forces factors adjustment Total

£000s (1,612) (2,686) (400) (4,698)

£000s (1,563) (3,123) (771) (5,457)

A detailed expenditure position as at 31st January 2006 is included at Appendix A.

4.1

Issues to note

Dentistry: + £1.2m (£200k improvement) Activity figures received to date as at January show a reduction in the forecast shortfall in patient income.

Mid Yorkshire NHS Trust (MYHT): – £400k (£700k improvement) The PCT and the Trust have continued to work constructively through a number of significant technical issues that became apparent from the introduction of a PbR trading relationship this year.

Market Forces Factor: -£0.8m (£400k improvement) This is a technical adjustment from which PCT budgets benefit from a reduced level of market forces factor payable as part of the national tariff from that previously forecast. The improvement results from completion Calderdale and Huddersfield NHS Foundation Trust: Balanced (no change) Month 9 service level agreement reports have been received from Calderdale and Huddersfield Foundation Trust, these showed a small over spend of approximately £177, 000 against plan. However, the PCT is aware of potentially significant levels of activity above plan in January and is working with the Trust to manage the SLA back to planned levels 5

Turnaround

Following the appointment of Carol Stubley, Interim Turnaround Director, a full review is being undertaken, in conjunction with the scheme leads, to assess the extent to which the 2006/7 turnaround schemes are delivering the planned level of savings. Until this work is completed, the position on progress against the turnaround plans is in line with that previously reported to the Board in January 2007. Actual expenditure levels are incorporated in the reported financial position but it remains important to know whether specific schemes have delivered the forecast savings.

In addition, the recovery implementation team is in the process of pulling together a turnaround programmed for 2007/8. This will consist of existing schemes which were included in the original Turnaround programme agreed by the Trust Board for the former Huddersfield PCTs, the rollout of schemes across Kirklees, approved business cases and other schemes. The outcome of this work will be brought to the Board as part of the Budget approval process.

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Balance Sheet

The PCT’s balance sheet comprises net assets/liabilities of the PCT and the sources of finance used to finance these assets.

A copy of the PCT’s balance sheet as at 31st January 2007 is included at Appendix B. The biggest movement in the balance sheet from that at 31st March 2006 is the reduction in value of creditors. This is due to cash restrictions impacting on the number of invoices paid at the end of last financial year.

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Cash Limit

To manage cash within its cash limit the PCT has requested a net cash limit adjustment from the Yorkshire and Humber NHS of £4.2m.

The PCT has also agreed to manage additional cash adjustments of £2m with the Yorkshire and Humber to assist in managing the Yorkshire and Humber’s overall cash position. This brings the overall cash limit adjustment to £6.2m.

8

Capital Resource Limit

For 2006/07 the PCT currently has a capital resource limit of £2.9m. A capital program has been agreed to ensure expenditure is managed within this limit.

Due to slippage on some areas of the capital program, the current forecast indicates that only £1.5m of capital will be spent this financial year. To ensure the capital resource is retained, the PCT has requested that the Yorkshire and Humber SHA broker the remaining £1.4m into 2007/08.

A report detailing spend against the capital program is included at Appendix C.

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9

Summary Performance against Key Statutory Duties/Targets

The PCT has a number of statutory financial duties/targets that are shown below along with an assessment of performance in 2006/07.

Financial Duties /Targets Achieve financial balance by containing revenue expenditure with the PCT’s revenue resource limit (as discussed in this report).

Forecast

Deficit

Achieve financial balance by containing capital expenditure within the PCT’s capital resource limit

☺

Balance

Recovery of full costs on provider activities.

☺

Achieve

To manage cash payments within the PCT’s cash limit (see above).

Achieve with support

Public Sector Payment Policy

Below target

10.0

Recommendations

The Board is asked to note the contents of the report, particularly: • • •

The financial position for 2006/07 and the risks associated; Progress against the Turnaround Plan; Performance against other key financial duties/targets in 2006/07.

Bryan Machin Director of Finance ‘ 21 February 2007

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