Technical / HFMA better care fund guidance

Getting things right at this stage will make the governance, accounting and reporting arrangements much more straightforward when managing the fund, according to new guidance from the HFMA and CIPFA.

Pooled budgets and the better care fund gives an overview of the governance and accounting issues related to the BCF. The fund aims to support integration and improve outcomes for service users and carers and goes live in April 2015.

The guidance calls on relevant organisations to consider all the accounting arrangements that will apply to the fund in advance of preparing the signed agreement. It summarises the new accounting standards IFRSs 10, 11 and 12 that will determine accounting treatment for the pooled budget. The key determining factor in the accounting treatment is the level of control exercised by each of the parties to the signed agreement.

In operational terms, there needs to be complete clarity over what is and what is not covered by the arrangement and how much each body is contributing and

when the contributions will be made. ‘There needs to be clarity around

which organisation manages the pooled budget and who has the power to commit expenditure (including details of approval levels),’ the guidance says. ‘This should include consideration of the contracting arrangements. For example, when the provider is an NHS body, then the standard NHS contract should be used as it meets all contractual requirements including those of the Commissioning for Quality and Innovation scheme.’

The local operating rules, including those for measuring performance, also need to be detailed – for the pooled budget as a whole and for any individual schemes.

For example, if the fund makes a contribution to a larger budget – such as in support of nursing or residential homes – and the larger budget overspends, it needs to be understood whether the fund ‘takes a hit’.

With NHS financial information consolidated nationally, care must be taken about different accounting treatments – in particular accounting on a gross or net basis. The guidance highlights that the default position in international financial reporting standards is gross accounting, although there are exceptions. ‘Parties should consider maintaining all management accounts on a gross basis as it is easier to produce financial reports on a net basis from gross information than the other way around,’ the guidance says.

It also highlights a number of issues that need to be taken into account in the year-end financial arrangements – in particular, the calculation of each partner’s share of the pooled budget’s income and expenditure. It is expected there will be a single calculation setting out the net balance in the pooled budget and the ownership of this balance.

‘Parties to the fund must agree its treatment in advance,’ it says. ‘CCGs cannot carry forward cash balances nor make payments in advance – therefore it

is important that likely year-end balances are accurately forecast so that action can be taken if necessary. If the partners envisage any surpluses to be held in the local authority accounts so that they can be carried forward, the arrangement must be set up in such a way as to allow this to happen while not breaching the regulatory or accounting requirements.’

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