Feature / Introduction to... performance managenent (FTs)

The foundation trust compliance regime emphasises self-certification, while regulator Monitor requires foundations to provide regular financial information.

The frequency of these submissions depend on the foundation trusts’ financial and governance risk ratings.

While most information is required quarterly, Monitor can demand it more frequently. Alternatively it may reduce the requirement to every six months if an FT has maintained a financial risk rating of 5 for four quarters; maintained a governance risk rating of green for four quarters; and been authorised for at least two years.

According to the Compliance framework, a well-managed board should already be receiving the information Monitor requires and it should be extracted easily from reports boards routinely receive as part of their oversight of business performance, risk and governance.

Monitor may escalate its performance management (for example, requiring monthly financial data) if a trust has an FRR of less than 3. But where it finds a significant breach of a trust’s authorisation, such as a fall of the financial risk rating (FRR) to 1 (highest risk) and a threat to the trust’s financial stability, it may intervene, requiring a turnaround strategy or even removing directors. Foundations must submit an annual plan at the beginning of the financial year, including a three- year forecast of their financial performance and results against plan for the past year. This is used to assess the forward risk of financial breach of authorisation and calculate a financial risk rating. They are calculated in the same way as Monitor’s in-year risk ratings.

In year, foundation trusts provide (generally quarterly) statements on their finances – for example, their year-to-date and latest quarter income and expenditure and certification that the FRR for the next four quarters will be at least 3.

Trusts with an FRR lower than 3 may also be required to provide an analysis of income and EBITDA (earnings before interest, tax, depreciation and amortisation) by service line for the previous and current year.

Monitor also has nine indicators of forward financial risk, which are submitted quarterly and do not of themselves trigger escalation or affect risk ratings but could lead to a meeting with the regulator if one or more of the indicators is present.