http://www.kirklees.nhs.uk/fileadmin/documents/meetings/may09/KPCT-09-76%20Finance%20Report

Agenda Item 06 Enclosure KPCT/09/76

NHS KIRKLEES Report To:

PCT Board

Title:

Finance Report

FOI Exemption Category

Open

Lead Director:

Bryan Machin

Executive Director of Finance Presented By:

Bryan Machin

Key Points to Note:

Financial targets for 2008/09 achieved based on draft Annual Accounts.

Revised planning assumptions for 2009/10 requiring amendments to the financial plan

Budget Implications:

As above

Risk Assessment:

As above

(To include impact on the achievement of national targets and legal implications)

Health Benefits

Not applicable

Staffing Implications

Not applicable

Sub Group/Committee:

Finance and Performance Committee

Recommendation:

The Board is asked to: 1. Note the financial results for 2008/09 based on the draft Accounts 2. Approve the virements to and from reserves to maintain a balanced budget 3. Agree that, on the basis of current planning assumptions, all foreseeable revenue growth for the next few years has already been committed and that, therefore, future developments will have to come from recycling existing budgets or efficiency savings over and above the national requirement.

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NHS Kirklees Report to Board 27th May 2009 Finance Report

Purpose of this Report The purpose of this report is to: A. inform the Board of the PCT’s financial performance for 2008/09 as included in the draft Annual Accounts submitted for audit, and B. inform the Board of significant changes in the PCT’s planning assumptions for 2008/09 A Financial Performance 2008/09 A1.

Background

At its meeting in March the Board was advised that the PCT was forecasting a financial surplus of £2.8m, and that the risks to not achieving this year end target were reducing.

A2.

Annual Accounts 2008/09

Draft Annual Accounts were submitted on the 23rd April in line with national requirements. They show that we have achieved our planned surplus of £2.8m for 2008/09.

The draft Accounts were considered by the Audit Committee at its meeting on the 6th May. These are currently being reviewed by external audit who will present their report on the Accounts at the next Audit Committee meeting on the 10th June prior to the audited Accounts being submitted on the 12th June 2009.

A3.

Final revenue budget position for 2008/09

The PCT has a draft year end surplus of £2,787k. Variances from those reported in March are shown in the following table and discussed in the narrative on the following page: Summary over/ (under) spends

Month 12 £000s

Month 11 £000s

Moveme nt £000s

CHFT – SLA Mid Yorks – SLA Leeds SLA Children’s Services Other MH/LD Services (ex Specialist Services) SWYMHT – SLA GMS/PMS Pharmacy Prescribing Investment Schemes Kirklees Community Healthcare Services Other budgets

1,201 3,262 (1,164) (467) 5,834 (1,435) (2,312) 16 (65) (7,175) (162) (320)

865 3,356 (1,240) (444) 5,587 (1,346) (2,376) 40 (138) (7,011) (235) 142

336 (94) 76 (23) 247 (89) 64 (24) 73 (164) 73 (462)

Total

(2,787)

(2,800)

13

Further detail is shown in the Summary Expenditure position in the Monthly Reporting Pack

Significant changes to the forecast reported in March are as follows: •

CHFT SLA – Increased expenditure of £0.3m (full year forecast £1.2m over spend) Due to an increase in uncompleted spells in 2008

•

Other budgets reduced expenditure of £0.5m.

The draft Annual Accounts include a £1m surplus attributable to the Specialised Commissioning Group (North). This has been offset by a reduction in budget due to the transfer of an additional £500k into the strategic investment fund, this increases the amount held in the strategic reserve to £15.4m. The net effect is therefore a £0.5m reduction in budget variance.

A4.

Conclusion on Revenue Financial Performance 2008/09

The draft accounts demonstrate that the PCT has achieved a surplus of £2.8m for 2008/09 and therefore met its control total of £18.2m (i.e. planned surplus of £2.8m and £15.4m remaining in the SHA Strategic Reserve).

A5.

Capital

The draft Accounts show that the PCT has achieved its financial target of managing capital expenditure within the capital resource limit. The PCT under spent by £1.121m, in the main due to slippage on the £2m scheme at Holme Valley Memorial Hospital. The PCT is unable to carry forward this under spend however the PCT’s 2009/10 capital plan approved by the Yorkshire and Humber Strategic Health Authority includes the balance of the required expenditure on this scheme.

A6.

Cash

The PCT has achieved its financial target of managing cash payments within its cash limit, ending the year with a small cash balance of £90k.

A7.

Public Sector Payment Policy

The PCT marginally failed its target of paying 95% of its undisputed invoices within 30 days, achieving 93% of bills paid within target, a significant improvement from 2007/08 (79.3%).

A8.

Monthly Reporting Pack

The Financial Reporting Pack as at 31st March 2009 is included as an appendix to this report.

A9.

Summary Performance against Key Statutory Duties/Targets

Financial Duties /Targets Achieve financial balance by containing revenue expenditure with the PCT’s revenue resource limit.

Financial Duty Achieved Surplus ☺

Meet SHA’s revenue control total target

Achieved ☺

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

Balance ☺

Recovery of full costs on provider activities.

Balance ☺

To manage cash payments within the PCT’s cash limit

Achieved ☺

Public Sector Payment Policy

Marginally below target

B Financial Planning 2009/10 B1.

Background

At its meeting in March the Board approved revenue budgets for 2009/10 based on a financial plan for this year that was recurrently over committed by £3.3m offset by an equivalent non-recurrent under commitment. The Board were advised of risks within the plan: • there was a significant gap between our expenditure assumptions for contracts with CHFT and MYHT and their income expectations.

• there were significant issues associated with the cost base of LTHT; I anticipated that as a significant commissioner from LTHT we may be asked to consider an above tariff contribution.

• contract negotiations with the Yorkshire Ambulance Service were ongoing but indications were that a sum additional to that included in the plan will be agreed.

• the plan included an efficiency expectation of £0.5m for which there is no current plan. I expected this to be achievable in year but it will present a challenge to achieve this recurrently.

The Board were advised that until these risks are resolved and their effect quantified it would be prudent not to commence the spending of new recurrent developments included in the plan unless they are contractually committed B2.

Revised assumptions and amendments to 2009/10 budgets

The Board approved revenue budgets for 2009/10 based on the financial plan as it was then constructed. It has proved necessary to reflect changed financial commitments in the plan which are presented to the Board as requests for virements to and from Reserves to maintain a balanced budget.

Budgets approved by Board Virement requested All agreed contracts LTHT risk Not exercising Beckside break clause Budget error re Beckside break clause Commitment to SCG Commitment to Kirklees Council Commitment to SHA training funds Release excess inflation reserve Release provisions reserve Reductions in funding approved in plan Maternity Substance Misuse Obesity Sexual Health Remove balance of strategic reserve Better Care Better Value efficiencies now required for CHFT contract Predictive Risk tool cost in excess of funding approved Working Time Directive allocation Gables income unlikely to be 09/10 Additional withdrawal from Strategic Investment Fund £3m contingency utilised to balance Revised financial plan following virements

Recurrent £m 3.3

Non-recurrent £m (3.3)

2.1 2.0 (0.3) (0.3) 0.5 0.3 0.1 (0.3) (0.4) (0.4) (0.3) (0.2) (0.2) (0.6) 0.5 0.6 0.4 0.5 (2.5) (1.0) 5.4

(5.4)

B3.

Consequences of revised plan

The Board will wish to be assured that in year financial balance is achievable in 2009/10 and all future years and that recurrent balance is achievable in the medium term.

The 2009/10 position is being managed by a request to the SHA for an additional withdrawal from our Strategic Investment Fund of £2.5m above that agreed as part of our control total and through committing £1m of our £3m non-recurrent contingency. Ideally, the full £3m would remain available for unforeseen in-year issues but £2m provides a significant buffer against financial risk.

The reduced level of contingency means that it is vitally important that revenue budgets do not overspend this year. This applies particularly to our main acute contracts which have significantly overspent in recent years. To some extent these have been managed overspendings, taking into account the financial position of the PCT but that level of flexibility is not available this year. The risk is mitigated by the inclusion in acute budgets of realistic activity planning assumption, including for the first time the likely implications of demographic change. However, as has been reported previously, the introduction of HRG4 this year presents additional risk.

Overall, financial balance remains achievable this year.

The consequences of the increased recurrent over commitment this year will be felt in future years. The recent Budget Statement confirmed growth of 5.5% to the NHS in 2010/11, albeit with an increased efficiency requirement of 3.5% but there can be little doubt that after that we must plan for, at best, nil growth.

The Medium Term Financial Plan approved by the Board in March recovered the £3.3m recurrent over commitment in 2010/11. I would advise the Board that the increased recurrent over commitment of £5.5m effectively means that there will be no growth available for discretionary investment in 2010/11 (and by implication for some years after that). The recurrent budgets that have been approved for 2009/10, amended by the virements above, are all that is available. Future developments will have to come from recycling existing budgets or efficiency savings over and above the national requirement.

The Board is asked to support this conclusion as a basis for current planning.

Further work will be done to assess the implications for planned developments in 2010/11.

B4.

Conclusion

Although the financial situation in 2009/10 has greater risk than identified previously, in year financial balance is still achievable through the use of nonrecurrent money from the Strategic Investment Fund and the Contingency Reserve.

In the medium term, money will be much tighter than we have experienced in recent years and any growth available this year and next has already been committed.

Recommendations The Board is asked to: 4. Note the financial results for 2008/09 based on the draft Accounts 5. Approve the virements to and from reserves to maintain a balanced budget 6. Agree that, on the basis of current planning assumptions, all foreseeable revenue growth for the next few years has already been committed and that, therefore, future developments will have to come from recycling existing budgets or efficiency savings over and above the national requirement

Bryan Machin Executive Director of Finance 18th May 2009