Technical / Financial challenges raise profile of going concern assessment

However, this expectation needs to be tested each year.  Accounting standard IAS 1 requires that, each year as part of the accounts preparation process, management makes an assessment of the entity’s ability to continue as a going concern.

This responsibility usually falls to the audit committee. Last month, it was reported the NHS provider sector posted a deficit of £2.26bn at the end of December 2015, with 75% of provider bodies reporting a deficit. In this context, the going concern assessment is something that is likely to attract more management time and attention than in previous years.

The Treasury’s Financial reporting manual (FREM) provides the following interpretation of the going concern requirements set out in IAS 1. ‘The anticipated continuation of the provision of a service in the future, as evidenced by inclusion of financial provision for that service in published documents, is normally sufficient evidence of going concern.’

Both the Department of Health’s Manual for accounts and the foundation trust Annual reporting manual provide further guidance on what this means for different types of NHS bodies. But, generally, unless there is evidence a particular service will no longer be provided by any public sector body, the entity is assumed to be a going concern. Given this interpretation, it is unlikely that any NHS accounts will be prepared on a non-going concern basis this year.

So, why bother with the assessment? IAS 1 also requires that where management is aware of material uncertainties that cast significant doubt on the entity’s ability to continue as a going concern, those uncertainties should be disclosed.

This year, many NHS bodies will face material uncertainties around their financial future for the first time. Some are in receipt of cashflow support or expect to request it in the near future.

Others have had, or expect to need, one-off or recurrent funding. Some of this will have been agreed and documented with the regulatory bodies. But it is unlikely any longer term financial support will be formally agreed at this stage, as some is tied to the as-yet-incomplete sustainability and transformation plans.

Given the inevitable level of focus on NHS bodies’ financial positions at the year end, it is worth considering now what information the audit committee (and possibly governing body) will want to see when undertaking a going concern assessment. Now is also the time to start drafting the disclosures in both the annual accounts and the annual report.

This could have an impact throughout the document, in the overview and performance analysis, the governance statement, the accountable/accounting officer’s statement as well as the accounts themselves. It will be important that the whole document is consistent and ‘tells a story’.

Auditors will also be looking for evidence to support management’s conclusions and disclosures.
This will vary among auditors and entities, but it is worth a joint discussion at an early stage. If your auditor wants to see supporting letters from regulatory bodies or other third parties, these can be sought as soon as possible.

Debbie Paterson is an HFMA technical editor

• The Department of Health has set out requirements for the collection of reference costs for 2015/16. The cost collection will take place between 20 June and 29 July. The Department said the changes supported the development of price setting and improvements in data quality, validation and assurance.

• The HFMA has produced a summary and early impact assessment on the requirements of IFRS16 on accounting for leases. It looks at the detail of the standard, including definition, disclosures and transition to the new standard. The European Union and the Treasury must endorse the standard before it can be applied in the NHS.

• The HFMA has also published a briefing of the NHS England/Monitor consultation on the proposed national tariff for 2016/17. The consultation period will close on 11 March.

• The Department of Health has updated its guidance on charging overseas visitors for hospital care to bring the guidance in line with The National Health Service (charges to overseas visitors) (amendment) regulations 2015.

Costs and savings reviewed for trauma guidelines

NICE has five guidelines (NG37-NG41) describing and encouraging good practice in areas of trauma – complex fractures; non-complex fractures; spinal injury assessment; major trauma; and major trauma services. Major trauma is the leading cause of death in people under 45. It is estimated there are at least 20,000 cases of major trauma each year in England, resulting in 5,400 deaths and many others result in permanent disability requiring long-term care
(National Audit Office 2010).

In 2013/14, there were about 844,200 A&E attendances with dislocation, fracture, joint injury or amputation as the primary diagnosis, and 758,400 referrals from emergency departments to fracture clinics (Health and Social Care Information Centre, 2015).

People who have major trauma (injury severity score greater than 15) should be treated in a major trauma centre. These provide specialised care for people with multiple, complex and serious major trauma injuries and work closely with local trauma units. Major trauma centres operate 24 hours a day, seven days a week. They are staffed by consultant-led specialist teams, including orthopaedics, neurosurgery and radiology teams with access to diagnostic and treatment facilities.

A resource impact report looks at the impact of implementing these guidelines in England. Areas of potential costs include:
• Providing airway management in prehospital settings
• Additional use of computed tomography or magnetic resonance imaging for first-line imaging for spinal injury assessment and non-complex fracture
• Providing a definitive written report of emergency department X-rays of suspected fractures before the person is discharged from the emergency department.

Areas of potential savings include:
• Reduced emergency department costs, saving £56-£239 per attendance
• Reduced repeat hospital attendances. This may save between £76 and £130 for each avoided adult trauma and orthopaedics attendance, and £93–£144 for each paediatric trauma and orthopaedics attendance
• Reduced emergency department consultant time
• A decrease in the use of tourniquets
• Not using a rigid cast for torus fractures of the distal radius
• Offering K-wire fixation when surgical fixation is needed for dorsally displaced distal radius fractures.

Stephen Brookfield, senior business analyst, NICE