Feature / Finance explained

At the pre-accounts planning conference in February, NHS chief financial controller Janet Perry highlighted the major changes for 2011/12 year-end reporting – not least the complete redesign of the financial monitoring and accounts forms (FMAs) undertaken by the Department of Health.

Major consistency issues surfaced during the 2010/11 year-end process. This occurred for a number of reasons: a small but significant number of errors in the FMA forms and pro-forma accounts, inconsistency between the FMAs and organisations’ locally published glossy accounts and some errors in completion by the organisations themselves.

Resolving the FMA issues resulted in Q3 forms being released late and the Department has recognised the difficulties this has caused. The forms have been substantially revised and now separate out accounting from management information, helping organisations to recognise how FMAs relate to accounts forms, and how accounts information relates to management information. The delay has been a problem, but the Department believes getting the forms right now should ensure the Q4 forms and linked pro-forma accounts will be high quality and fit for purpose.

While the revised forms will help address inconsistency, organisations retain the responsibility for ensuring consistency between their FMAs and accounts. The Department will require consistency assurance statements on both draft and audited accounts signed by both the chief executive and the finance director. Local accounts can still be enhanced, for example to add greater detail or remove redundant notes, but the Department would not expect any other differences.

Elsewhere, the alignment project – the government initiative to ensure consistent financial reporting – has led to a requirement to fully consolidate NHS trusts and foundation trusts into the Department’s 2011/12 resource account. This also means that 2009/10 and 2010/11 intra-NHS balances have to be restated and, where needed, agreed with FTs. This is a significant change for FTs, where previously engagement has been on a voluntary basis. Monitor has written to all FTs about their requirement to engage with the agreement of balances process. Where balances cannot be agreed with the counterparty, differences should be appropriately recorded on the agreement of balances form. This applies to both the 2010/11 restatement and for 2011/12. Monitor has also informed FTs that strategic health authorities will be facilitating this process.

Another new requirement for 2011/12 is to record transactions as either ‘administration’ or ‘programme’ and this analysis will form part of the agreement of balances exercise. As direct deliverers of healthcare services, NHS trusts and FTs should record all transactions as ‘programme’. This applies even if they provide a service to a primary care trust or SHA, where that body would record the transaction as ‘administration’.

Two significant dispensations have been agreed. Restatement is not required for the administration/programme analysis, nor for Transforming community services mergers in 2011/12, where adjustments to opening balances are recognised through ‘adjustment for transfer of functions’ lines.

Ms Perry told Healthcare Finance. ‘Financial accountability, and in particular, the preparation of the accounts, continues to be of critical importance for an organisation meeting its local governance duties and its statutory responsibilities. The importance of engaging early with auditors and other key stakeholders cannot be over emphasised.’