Feature / Finance explained

FOUNDATION TRUST REGULATOR Monitor issued a consultation document last month on changes to FTs’ 2011/12 Annual reporting manual, writes Steve Brown.

A reduced eight-week consultation reflects the minor changes being proposed. Among the changes is guidance on accounting for the CRC (carbon reduction commitment) energy efficiency scheme.

The cross-sector CRC scheme began in April 2010, although the first year, 2010/11, was a reporting year only. The first performance table, initially based on a measure of organisations’ early action on carbon reduction, is expected to be published this autumn. But in the current year, the scheme will be stepping up a gear, with organisations required to actually buy allowances for the carbon they emit – albeit a retrospective purchase at the beginning of 2012.

The scheme has already been redesigned compared with the original concept. An initial plan to have a recycling scheme – with all payments for allowances pooled and then redistributed to participants based on performance – was scrapped, with the £715m payments (2011/12) now going straight to the public purse.

And further changes are on the way. Proposals expected to be firmed up next year will include the replacement of plans for future auctions of allowances with two fixed price sales – one at the start of the year and then more expensive allowances available retrospectively at the end of the year.

In the meantime, the focus for the 172 fully participating NHS trusts and foundation trusts is the current year. Monitor’s guidance points out that FTs (although the principle applies to trusts too) will need to surrender an allowance to the government for every tonne of carbon dioxide emitted. It states: ‘Therefore in line with IAS 37 Provisions, contingent liabilities and contingent assets, NHS FTs should recognise a liability (and related expense) in respect of this obligation as CO2 emissions are made. The carrying amount of the liability at 31 March 2012 will therefore reflect the CO2 emissions that have been made during 2011/12.’

The liability recognised will be the amount required to settle the obligation – at the rate of £12 per allowance/tonne.

Monitor’s guidance also points outs that FTs will need to account for the purchase of allowances from government, and their subsequent actual surrender.

However, it states: ‘The sale of allowances will not occur until 2012/13 and therefore NHS foundation trusts will not account for the purchase and surrender transactions in 2011/12.’

While the allowances make up the main financial consideration for NHS participants, there are other costs. A one-off registration fee of £950 is supplemented by an annual subsistence charge of £1,290 and a fee of £10 for participation in the fixed price sale.