Feature / Finance explained

In april next year a number of NHS organisations in England, including strategic health authorities and primary care trusts, will cease to operate. Responsibilities and staff will be transferred to the new organisations, and finance professionals will be faced with the task of producing a final set of accounts for each body.

Unlike previous restructuring, there are perhaps no obvious successor bodies, particularly for PCTs, where functions are to be spread across a number of different organisations. The Department of Health responded to this at the end of October with draft year-end transitional arrangements for SHAs and PCTs. Final guidance is due by the beginning of December.

A letter from NHS chief financial controller Janet Perry said the Department would continue to issue financial guidance up to the end of March 2013 to support the transition. In particular, further guidance would be published on accounts preparation – covering arrangements for preparing and closing PCT and SHA 2012/13 accounts; accounts governance and sign-off; and the treatment of closing balances.

She also issued a closedown checklist covering 12 areas, each highlighting the expected state that organisations should seek to achieve at the point of transition. The 12 areas include governance, accounts and audit, financial and cash management, banking arrangements and charitable funds.

SHAs and PCTs must ensure their accounts are ready to be produced and audited shortly after year-end. This means their boards and audit committees must be provided with the assurance that arrangements are in place to close down the accounts and financial systems by 31 March. They should be managing the handover to successor bodies and have made arrangements to archive accounting and financial records.

Practical issues

There are practical issues to consider when finalising the accounts. With SHAs and PCTs winding down and new organisations recruiting, staff with the skills and knowledge to do the job may have found a position in other parts of the NHS or may be set to leave the service. The guidance says the services of the latter group could be secured through the retention and exit terms scheme (RETS) and acknowledges staff may have to be sourced from outside the NHS, for example by recruiting interim staff.

But much can be achieved before the end of the financial year, particularly as the final quarter approaches. Some of this will be about implementing and building upon best practice developed over the past few years as NHS bodies have sought earlier closure of their accounts. This includes identifying and bringing forward year-end processes where possible.

Sales ledger invoices for 2012/13 should be issued without delay and debtor balances should be managed down so no debts remain at year-end that are more than a month old.

The Department suggests working with external auditors to ensure the pre-accounts interim audit focuses on areas that are likely to reduce the workload during the final accounts audit. External auditors could also be called upon to help identify audit work that could be completed early.

In addition, organisations should ensure there are arrangements in place to prepare working papers to support the months 11 and 12 reconciliation of acute activity. This will take place in April and May and the working papers should be supported by documentation.

Commercial bank accounts should be closed by 31 March and Government Banking Service accounts should be transferred to the Department. If closure of bank accounts is not possible, authorised signature authority should be transferred to named contacts at the Department.

As with any year-end, the organisations must ensure that all financial commitments and liabilities are identified and accounted for in forecasts and the annual accounts. The Department’s draft says organisations should strike a balance – they should not hold excessive cash balances at year-end, but have the funds necessary to meet creditor demand as it becomes due. Disputes should be resolved by 31 March.

Charitable funds should be transferred or arrangements made to transfer funds to the trustees of appropriate NHS receiving organisations. Where appropriate, funds can be wound down and closed. Arrangements should be made to complete the charities’ accounts within the appropriate deadlines.

This is just a sample of the work that needs to be done. There is a lot of it, although much would be needed in closing any year’s accounts. However, the upheaval finance departments face as staff move on to new jobs will add to the complexity of the task. PCTs, SHAs, receiving organisations and external auditors will have to work closely together and plan well to ensure the process runs smoothly.