Technical / Accounting guidance brings first year of STF to a complex close

At the HFMA’s pre-accounts planning
conference, the one issue that was flagged as a potential difficulty was accounting for the sustainability and transformation fund (STF).

This certainly appears to be an accurate forecast, if the timing of the guidance is anything to go by. The final guidance on accounting for Q4 STF payments was issued on the Department of Health’s website on 3 April, although we understand that NHS provider bodies received the guidance slightly ahead of the year-end.  

Then on 18 April, additional guidance was issued to set out how to manage the circular impact the STF receivable was having on public dividend capital dividend calculations.

In July 2016, every provider body was informed of their allocation from the STF.  Receiving this allocation – paid in quarterly instalments – was conditional on meeting set conditions. Some 70% of the fund was paid for achieving financial control totals with the remaining 30% additionally requiring organisations to meet agreed performance trajectories.

Some of the STF was unallocated from the outset – with some providers not agreeing control totals; some was not earned as the conditions were not met. At Q3, some £424m of the total £1.8bn was being held centrally.

However, the policy aim has been to make the full fund available to providers to offset deficits and not to hold as a central contingency. And so the STF central balance (or at least the 70% linked to control totals) is being made available to providers via a finance incentive scheme and a bonus scheme.

The incentive fund is available to all bodies that have achieved their control total on a pound for pound basis. A provider with a control total deficit of £100m that achieved a deficit of £90m would receive an additional £10m incentive payment and would therefore report a final deficit of £80m.  

The bonus element is to be shared among providers that achieve their control total, but with a weighting towards those who committed to the improvement earlier in the year.   

The calculations of the allocations from the various parts of the fund have been made centrally by NHS Improvement. These calculations were made all the more complicated by the fact that no-one could know the size of the unallocated and unearned pot until Q4 performance was reported in a near final form.

NHS bodies are well used to including information produced by a third party in their accounts. HFMA members often report that this is fine, as long as they receive that information on a timely basis. In the case of the STF, this could never happen.

To allow them to calculate provider bodies’ share of the STF, NHS Improvement requested a ‘pre-submission’ data collection. It then had two working days (and a weekend) to make the calculations and provide the necessary information back to providers to allow them another two working days to complete their draft accounts ready for submission.

As NHS Improvement has pledged to allocate the whole £1.8bn of the STF to provider bodies in 2016/17, the actual final allocations won’t be known until the accounts are audited and finalised. Any audit adjustments that adversely affect performance against control total could result in bodies losing STF.  

It is not clear whether any audit adjustments that improve performance against control totals will result in additional funding. Given that the STF ‘pot’ is fixed, any late adjustments must have an equal and opposite affect elsewhere.  

One test of whether NHS Improvement’s plans work will be if the income recorded as
STF funding in ‘other operating income’ of provider bodies matches the expenditure recorded by NHS England against its central code.  If there is a mismatch, then questions will no doubt be asked and adjustments will have to be made.