Technical / Agreement of balances remains key focus despite good 2015/16 results
As we reach the end of the calendar year, it is time to start preparing for the end of the financial year, writes Debbie Paterson. One of the first jobs for the finance team in 2017 will be the quarter three agreement of balances exercise.
The process looks to eliminate any accounting mismatches between different bodies within the Department of Health group.
For example, £500,000 recorded as earned income with a matching receivable in NHS trust accounts, but without matching expenditure in clinical commissioning group accounts, will lead to misreporting.
While Q2 focuses on receivables and payables only, at Q3 agreement is also needed for income and expenditure for the year to date.
The Department of Health has not yet issued its guidance for quarter three (although revised guidance covering Q2 was issued in September) – that is usually a Christmas present. But it has indicated that there will not be much change to the process from last year.
It was pleased with the outcome of the 2015/16 agreement of balances and has concluded that there is not much it can do to the guidance to improve matters.
Despite this, practitioners responding to HFMA’s 2015/16 year-end survey put agreement of balances as one of the top three areas needing further support and guidance. In the absence of major revisions to central guidance, finance teams may want to consider some basic steps that might help the process go as smoothly as possible.
Fully engage with the process Prior to 2011/12, NHS provider bodies were not fully consolidated into the Department of Health’s accounts. Foundation trusts, in particular, could decide whether or not to engage with the agreement of balances process. When, in 2011/12, provider bodies were brought into the Department’s accounting boundary, the option to engage in the process was removed and participation in the exercise became mandatory for all. There is no excuse, six years later, for treating this as an optional exercise.
It is very important to the Department to allow it to prepare consolidated accounts for more than 400 bodies, but it should be an important part of the financial management of all of those NHS bodies involved.
While agreement of a balance may not be an agreement to pay, a mismatch must surely raise concerns that the amounts reflected in one of the body’s accounts are not accurate.
Read, disseminate and follow the guidance The agreement of balances guidance changes very little year on year and the Department of Health helpfully provides a summary of the key changes it makes each quarter. At more than 50 pages long, reading all of the guidance may seem poor use of time if you’ve been involved in the process for some time and you know what you are doing. However, the guidance is well worth revisiting occasionally to make sure that you haven’t missed a change – or simply to check your practice against that set out in the guidance.
It is equally important to make sure that everyone in the finance team reads the guidance and understands how the work they are doing could impact on the exercise. The areas in which problems often arise are: accruals; long-term contracts such as maternity pathways (where, for example, antenatal care is often delivered in two separate years); and deferred income.
Stick to the timetable It is difficult but it makes everyone’s life a little bit easier if everyone meets the necessary deadlines.
Keep contact details up If you don’t tell people where to send your statements how will they pay you? This is particularly important for large organisations such as NHS England, where there are different contact points depending on the service the statement relates to.
Talk to your counterparties Reading between the lines, a lot of the feedback the HFMA receives is basically ‘we are doing it right and they are all doing it wrong’. Perhaps you are frustrated with a particular counterparty that always sends its statements in pdf format. Or perhaps you know that there will be a mismatch with another counterparty because ‘there always is’.
In these days of email, it is easy to forget that there is a person at the other end of the process who may well be as frustrated with you.
Before the exercise even starts, see if you can contact the key counterparties to discuss the best way to agree balances between you and resolve the mismatch before the statements are even sent.
Technical review
A meeting of the HFMA’s Accounting and Standards Committee in November discussed how the apprenticeship levy should be accounted for. There appears to be no obvious solution for any of the nations in the UK. In Scotland, Wales and Northern Ireland, it is clear that there will be an additional expense from April 2017 as the levy is paid. However, the plans for how employers will access that money as they train apprentices are not yet clear.
In England, how funds will be accessed is known, but the accounting is not clear. The amount of levy paid by employers (in respect of employees who live in England) will be held in a digital fund that can be used to pay approved training providers for training and assessing apprentices. The digital fund is a virtual fund for employers so they will not receive cash from it. The committee identified three possible ways to account for the levy and the digital fund:
- Expense the levy paid, do not reflect the digital fund in the accounts at all, as there is no benefit or liability for the employer
- Expense the levy paid and establish a government grant receivable for the amount of training to be purchased only once conditions for accessing the fund have been met
- Do not expense the part of the levy that will be used to fund training but instead hold that as a pre-payment, which is released when the training is provided.
The committee plans to issue a discussion paper setting out these solutions in more detail to support discussions with auditors and colleagues. The Department of Health, NHS England and NHS Improvement are discussing this issue and will raise it with the Department for Education.
NHS improvement ran its consultation on the 2016/17 Annual reporting manual (ARM) during the first half of November. The manual sets out the requirements for foundation trusts’ annual reports, while detailed accounts requirements are set out in the Department of Health Group accounting manual 2016/17 (see Healthcare Finance, October 2016, page 27). Despite the different manuals. Foundation trusts are still required to present their annual report and accounts as one document. Key changes include the staff costs note now being included in the annual report staff report rather than the accounts, with a summarised note remaining in the accounts. Regulatory rating disclosures should also now reflect the new single oversight framework. The manual also now refers to the NHS standard contract’s requirement for sustainability reporting.
The first full provider segmentation under the new single oversight framework (SOF) will be published before Christmas, NHS Improvement has said. This will update the shadow segmentation published in October. The new framework aims to help providers attain and maintain Care Quality Commission ratings of good or outstanding, with providers segmented on the basis of the level of support they need across five themes:
- Quality of care
- Finance and use of resources
- Operational performance
- Strategic change and leadership
- Improvement capability.
The finance assessment includes five metrics covering capital service capacity, liquidity, income and expenditure margin, distance from plan and agency spend.
NHS Improvement has issued new 
capital guidance to replace all previous guidance relating to the capital regime and investment business case approval process published by the NHS Trust Development Authority or Monitor. It describes the delegated limits and business case approval process for capital investment and property transactions applying to any foundation trust in financial distress and to all NHS trusts. Existing thresholds for reporting and review remain in place for foundation trusts not deemed to be in financial distress. Other useful information includes a business case core checklist for use in the production of business cases and advice on post-project evaluations.
Nice update: Revised guideline for chest pain
NICE has produced an updated clinical guideline (CG95), which focuses on chest pain of recent onset. The updated guideline includes new recommendations on which diagnostic tests adults with stable chest pain should be offered following an assessment of the type of chest pain and other risk factors.
Chest pain is a symptom of coronary artery disease (CAD). It occurs when the blood supply to heart muscles is restricted as a result of atherosclerosis in surrounding blood vessels. This type of chest pain, known as angina, can affect function and physical ability, as well as quality of life. If left untreated, it can lead to myocardial infarction (heart attack), which can be life threatening.
New evidence was identified on the use of non-invasive tests to diagnose CAD in people with stable (non-acute) chest pain. New evidence was also identified on clinical prediction models that may lead to improved estimation of the pre-test likelihood of CAD.
Implementing NICE’s guideline may result in the more effective use of NHS resources and improved prognosis for adults with chest pain because of prompt and accurate diagnosis.
It may also lead to more appropriate diagnostic investigations and reduced adverse events. Increasing the number of CT coronary angiography scans performed may have resource implications because of the availability of suitable scanners and appropriately trained professionals. Any associated resource impact should be considered locally.
Stakeholder comments suggested that limited availability of suitable CT scanners and appropriately trained professionals may affect the speed of implementation.
A sample calculation showed that additional savings of £31,500 are possible for a population of 100,000 from year five onwards.
Stephen Brookfield is acting associate director resource impact at NICE
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