News / Board view is key despite ‘unusual’ review of accounts

HFMA policy and technical director Paul Briddock (pictured) said the move ‘doesn’t seem to place much confidence in the assurance mechanisms already in place to ensure reasonable financial estimates and judgements are being made’.

Healthcare Finance understands that 20 organisations were identified to take part in the ‘transactions review’. A letter to selected organisations said the exercise was about understanding the financial position of the whole Department of Health group, with a focus on ‘ensuring that we understand that items have been treated consistently across the health group’.

The work was due to examine the application of accounting policies and to ‘investigate various transactions where guidance could be misinterpreted or where assurance is needed that changes to guidance are being applied consistently across the group. The participant organisations were chosen to provide a ‘representative view of the system’. And the Department said the purpose was to ‘support the group accounts’ and not to ‘critique your local financial statements’, which would continue to be audited in the usual way.

The move comes amid concerns that the Department is close to breaching its spending limit for 2015/16. NHS providers’ quarter three figures suggested their combined year-end deficit could be as high as £2.8bn, compared with a control total of £1.8bn.

A January letter from Monitor and the Trust Development Authority (now merged into NHS Improvement) set out a series of measures that providers should consider to improve their financial positions. These included ‘removing prudence’ from the balance sheet, reviewing provisions and reviewing asset lives, which could have an impact on depreciation charges.

Some reports labelled the move as ‘desperate’ and a few finance directors suggested it sat uncomfortably with the requirement for finance directors to use their professional judgement in taking a view on provisions and other issues. It also follows concerns raised by an anonymous finance director in a letter to the Public Accounts Committee about finance directors being pressured ‘into taking the wrong judgements’.

‘Ultimately it is for the board of directors to make these estimates in the draft accounts, which are then assessed independently by auditors to ensure that they are reasonable and that the organisation’s accounts properly reflect its financial position,’ said Mr Briddock.

He added that the reviews could cause ‘significant difficulties if differences of opinion arise and people feel that their professional judgement is being compromised’. ‘Directors of finance and chief financial officers need to work within their professional boundaries and guidelines and use accounting standards appropriately when making financial judgements and estimates,’ he said.

‘In reporting their financial position, finance directors and their boards need to be completely transparent about any non-recurrent measures, and work closely with their auditors in the preparation of accounts. They should not be unduly influenced outside of that process.’

In wider media coverage, Sally Gainsbury, senior policy analyst at thinktank the Nuffield Trust, described the measures trusts are being asked to consider – such as ‘being clever about when you book income and when you book expenditure’ – as falling ‘into the area of fiddles’.

In a statement to Healthcare Finance, she said: ‘NHS finance directors know better than anyone that the sort of accounting manoeuvres that have been uncovered are simply not a sustainable long-term solution, particularly when the financial  pressures on trusts are becoming greater by the week.

‘Just last month, out of the blue the Budget added on what we estimate could be an extra £650m pension costs for the NHS in 2019/20. It is becoming increasingly unclear in this climate how the health service is going to be able find £22bn of efficiency savings by 2020.’